Keysborough Tennis Club: Investment Portfolio Development Project

This project report outlines the development of an investment portfolio for the Keysborough Tennis Club. It begins with an Investment Policy Statement, considering liquidity, returns, risks, time horizon, tax implications, and regulatory constraints. The report then details a capital allocation strategy, recommending a balanced approach with 40% equity, 40% debt, and 20% cash/money market securities. The portfolio composition includes specific stock selections from the Australian Stock Exchange (ASX), such as Australian Pharmaceutical Industries (API) and Appen Limited (APX), along with government bonds and debentures. Finally, the report presents a timeline and performance analysis based on the ASX All Ordinaries benchmark, tracking weekly stock prices to assess portfolio performance. The project demonstrates practical application of portfolio management principles, including diversification and risk management, within the context of a real-world scenario.

DEVELOPING AN
INVESTMENT PORTFOLIO

Table of Contents
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
Preparation of investment policy statement for the local tennis club based on liquidity, returns,
risks, time, tax and regulations ...................................................................................................1
PART 2............................................................................................................................................3
Preparation of prominent capital allocation strategy .................................................................3
PART 3............................................................................................................................................4
Preparation of portfolio that depicts the mix of capital allocation..............................................4
PART 4............................................................................................................................................6
Preparation of report that depicts the timelines and shows analysis of performances based on
the market index..........................................................................................................................6
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Portfolio Management relates to striking a balance between the investment mix and
policies with investment objectives in order to earn higher returns at minimum risk. A Portfolio
consists of a basket of different financial instruments such as stocks, bonds and marketable
securities with an objective to hedge the investor's risk and increase his returns at the same time
(Bonizzi, 2013). This project report aims at developing an investment portfolio by the end of
December, 2018 for a local tennis club called Keysborough Tennis Club and track the portfolio's
performance on a weekly basis.
PART 1
Preparation of investment policy statement for the local tennis club based on liquidity, returns,
risks, time, tax and regulations
Keysborough Tennis Club is an elite tennis club situated in Victoria, Australia. It has held
a number of important state and national championships over the years. The club has been using
an internet maximiser account for its saving to earn interest income. However, the club's
managing committee has decided to invest in various financial instruments to increase its
revenue. The budget decided by the committee for the given portfolio is $500,000. An
investment policy statement has been formulated for the same and has been presented below:
Keysborough tennis club
Statement of investment policy
Purpose:
This Investment Policy Statement aims to furnish the framework in relation to
objectives, policies and guidelines for the investment in securities of Keysborough Tennis Club,
Victoria, Australia. The purpose of investing in such instruments is to utilize the Club's funds in
a prudent and conservative manner by provisioning for them through diversification of asset
class held by the club. A copy of this statement will be furnished to all Investment managers.
Investment Constraints:
The investment constraints included in this policy statement relate to the following key
areas:
 Liquidity Requirements: Keysborough is a leasehold tennis facility with limited
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financial pockets to expend on the facility such as renovations, constructions of courts
and other areas. The club has decided to increase their liquidity by keeping aside
$500,000 as investment budget for the portfolio. The Club may withdraw 5% of its
investment income annually for operational purposes.
 Return Requirements: The assets will be invested, with prudence, to generate a
dividend and interest income of at least 5% to achieve the set goals and objectives of
the club.
 Risk Tolerance: A well-diversified investment portfolio shall be maintained with a very
low risk tolerance. Along with this a cash account with a risk tolerance of zero to very
low shall be opened and maintained to provide for any tax obligations and other
expected expenditure likely to be incurred in future.
 Time Horizon: The Club is expected to operate on perpetual basis. For this plan, a 10
year time horizon for the investments made in stocks, bond or cash equivalents such as
Marketable Securities will be employed. An appropriation will be made for the
fluctuations experienced in the market with due care and diligence.
 Tax Considerations: The Club is tax-exempt as a community service organisation under
Australian Taxation Office Guidelines prescribed by the government. This tax-exempt
status of the club must be taken into account while investing for organisation.
 Regulatory and Legal considerations: The Club follows a strict policy of prudence in
order to protect its assets and members. Proper care must be taken when making
investments on Club's behalf by avoiding options that may prove to be socially
unacceptable and unethical for its image. Any form of investment disallowed by the
governing laws shall be overlooked while considering diversification.
 Unique Needs and circumstances: The Club may withdraw more than 5% of its
investment income in case of occurrence of any unforeseen contingency or to
accommodate any changes in organisation's policy and guidelines.
Diversification:
The club shall keep a well-diversified portfolio as deemed reasonable. The equity
component of the portfolio shall not exceed more than 4.7% nor will the total holdings in any
company exceed 8.5% at any given point of time. Securities restricted to one sector shall not go
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beyond the limit of 25% of entire portfolio. Holding of marketable securities shall not exceed
4% of the entire portfolio. All investments should be readily available for review by the
organisation at any given point of time.
PART 2
Preparation of prominent capital allocation strategy
Keysborough Tennis Club has decided to consider a combination of equity, debt and cash
including money market securities (Tezanos Vázquez, and Sumner, 2013). Since the club's
managing committee has decided to invest in a $500,00 worth portfolio, it is suggested that it
opts for a balanced investment plan with well-diversified assets (Spatafora and Luca, 2012).
Keeping in mind the investment constraints provided in the statement of investment policy, the
suggested capital allocation policy for Keysborough includes a mix of 40% equity, 40% debt and
20% cash or money market securities (Harms, 2012).
Equity or Stocks includes financial instruments such as preference shares and equity
shares (Reuter, 2012). A maximum of 40% of entire portfolio or equity/preferential stock worth
$200,000 and a minimum of 10% of entire portfolio or equity/preferential stock worth $50000
must be maintained by the club to ensure high expected returns in form of dividends and capital
gains. Since this asset-class has high risk attached to it, it is recommended that an equal amount
of debt must be maintained to offset the effect of risk (Woodside-Oriakhi, Lucas, and Beasley,
2013). Dividends including franking credits are eligible for tax refunds by Australian Tax Office
and can prove to be a worthwhile investment for the club.
Bonds, both Australian as well as International, provide a fixed income to the investor
and can prove to be beneficial while diversifying one's portfolio. These may be government
issued or corporate bonds (Mikesell, and Whitney, 2017). They have a higher rate of return
attached to them. To ensure a fixed income source, a maximum of 40% of entire portfolio or
equity/preferential stock worth $200,000 and a minimum of 15% of entire portfolio or
equity/preferential stock worth $75000 must be maintained in the portfolio of the club.
Keysborough, like any other community organisations, holds a high savings account such
as internet maximiser account. These provide a low return with risk tolerance of zero or very
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low (Lakatos and Walmsley, 2012). In accordance to maintain liquidity in the portfolio, a
maximum of 4% investment on entire portfolio will be maintained in the form of cash
investments or equivalents (Lawry, and et. Al, 2017). This will help the organisation to meet its
cash requirements on a regular basis as these are considered as risk-free asset class. Money
market securities, like cash investments, are financial instruments with a maturity of limit of 1
year or less (Haroon, and et. Al, 2012). They include treasury bills, commercial papers and have
low risk attached to them. It is recommended that a mix of cash and money market securities
should be maintained in the portfolio within the specified limit of 4% investment.
PART 3
Preparation of portfolio that depicts the mix of capital allocation
The Australian market is regulated by Australian Stock Exchange or ASX. The ASX All
Ordinaries provides a benchmark for the entire Australian share market. The S&P/ASX 200
index is considered the benchmark for Australian equity performance.
Asset-class Total holdings
(%)
Sector Rationale behind choice
Equity(40%):
Australian
Pharmaceutical
Industries (API)
10.00% Pharmaceutical,
Healthcare
As per the historical performance of this
company, API stock has been moving in
a consolidated phase at regular intervals.
This stock fell to its lowest price of
$1.285 on January 3, 2019. However, it
has shown signs of increase for past two
weeks. The stock shows an outbreak from
its consolidation phase with a price break
at $1.40 indicating bullish tendencies of
the stock which can result in an increase
the overall portfolio value of
Keysborough.
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20.00% Technology A strong stock of ASX, this stock has
shown another outbreak of consolidated
phase that continued between October,
2018 to mid-January 2019. A gap up
along with strong volume shows bullish
trends hence it is recommended to buy
maximum of $100,000 worth shares of
this stock.
Appen Limited
(APX)
10.00% Data, Artificial
Intelligence
(AI)
With an increasingly high demand of AI
technology, the APX stock has proven to
be an attractive investment. The APX
stock, shows a triangular outbreak at
$13.97 (Razin and Sadka, 2012). To
corroborate this, an outbreak at $14.49
also makes sure that bullish trend
continues for APX in the share market.
Total 40.00%
Debt(40%):
Exchange Traded
Treasury Bonds
25.00% Government
Bonds
These government bonds are easily
accessible and convenient. One unit of
this bond held provides a beneficial
ownership worth $100 face value of
treasury bond. Hence, these are an
attractive option for diversification.
Total 25.00%
Apart from Treasury Bonds, debentures of a privately owned corporation worth $75,000
or 15% of entire portfolio can be bought of a company listed on Australian Stock Exchange
(ASX) with a maturity life of not more than 15 years. Cash investments such as money market
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securities with cash accounts supported by Federal Government's Financial Claims Scheme
(FCS) can help improve security on such investments as well as provide guarantee by
government to the investors. In accordance with the investment policy, a maximum of 4% or
$20,000 investment made in marketable securities and 16% kept as cash reserves in cash
accounts is recommended to meet the working capital requirements of the club.
PART 4
Preparation of report that depicts the timelines and shows analysis of performances based on the
market index
A timeline showing the above steps has been provided below in accordance with the
benchmark portfolio of ASX All Ordinaries for the purpose of comparison between the
performance of the market in relation the portfolio (projections):
Week Australian
Pharmaceutical
Industries (API)
Afterpay Touch Group
Limited (APT)
Appen Limited (APX)
31 December,
2018 to 5
January, 2019
$1.34 $12.12 $12.69
8 January to 12
January
$1.37 $13.34 $13.45
14 January to 19
January, 2019
$1.41 $14.07 $14.69
21 January to 26
January,2019
$1.43 $14.12 $15.02
28 January to 2
February, 2019
$1.44 $14.22 $15.20
2 February to 7
February,2019
$1.48 $14.45 $15.34
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12 February to 17
February, 2019
$1.52 $15.02 $15.45
19 February to 24
February, 2019
$1.55 $15.03 $15.52
Analysing weekly performance of Equity stocks chosen for Keysborough's Portfolio investment:
The benchmarks considered for analysing the performance of following stock are in accordance
with ASX All Ordinaries:
Stock Code: API
Stock Name: Australian Pharmaceutical Industries
Australian Pharmaceutical Industries provides technology data solutions for languages and
dialects to software companies and government. The following graph shows the weekly
performance of API as reported by ASX All Ordinaries or Market Index:
As can be observed in the above chart, API stock has been moving in a consolidated phase for
September 2018 to January 2019. From November, 2018 to early January, 2019, a 'W' shaped
candlestick pattern can be observed which the stock is able to break and increase 1% -2%
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reaching a price of $1.40. This shows a bullish (green) tendency of the company stock and
proves to be an attractive investment option from its performance chart (Heikkilä and et. Al,
2012).
Stock Code: (APT)
Stock Name: Afterpay Touch Group Limited
Afterpay Touch Group Limited provides technology data solutions for languages and dialects to
software companies and government. The following graph shows the weekly performance of
APX as reported by ASX All Ordinaries or Market Index:
As can be observed in the above chart, the APT stock shows a gap-up after a bullish
(green) candle is created in a consolidated phase between Mid-November, 2018 to early January,
2019.The gap-up (bullish) shows an increase in value of a stock when there is positive news
regarding the performance of the company's operations. This proves that APT is an attractive
investment option to diversify one's assets for a long term.
Stock Code: APX
Stock Name: Appen Limited
Appen Limited provides technology data solutions for languages and dialects to software
companies and government. The following graph shows the weekly performance of APX as
reported by ASX All Ordinaries or Market Index:
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The above chart shows that there is an increasing trend in the stock as it regains its
performance after hitting a low level. Since there is an increasing trend, one can invest in this
stock until it reaches as high as $1.80 to gain short-term profits.
CONCLUSION
From the above project report, it has been concluded that investment management is one
of the crucial aspect that can assist an organization to plan their future projects more effectively.
This will further help the company to determine overall risks and earning which they are going to
be earn in coming period of time. In the above report, a well organize portfolio of investment has
been design in order to track the performance of portfolio on weekly basis has been done. In
accordance with this, formulation of the investment policy statement with the use of specific
tools are taken into account. Some of the capital allocation strategy through considering the
current and future economic situation is being examine the allocation of the local tennis club.
Preparation of the explanatory statement as to which specific investment has been made in the
chosen areas is evaluated effectively. Analysis of the overall performance of the given portfolio
with the specific benchmark portfolio in relation to ASX for all ordinaries shares are examine
more effectively.
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REFERENCES
Books and Journal:
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Journal of Political Economy. 42(4). pp.83-107.
Reuter, P. ed., 2012. Draining development? Controlling flows of illicit funds from developing
countries. The World Bank.
Woodside-Oriakhi, M., Lucas, C. and Beasley, J. E., 2013. Portfolio rebalancing with an
investment horizon and transaction costs. Omega. 41(2). pp.406-420.
Mikesell, R. F. and Whitney, J. W., 2017. The world mining industry: Investment strategy and
public policy. Routledge.
Lawry, S., and et. Al, 2017. The impact of land property rights interventions on investment and
agricultural productivity in developing countries: a systematic review. Journal of
Development Effectiveness. 9(1). pp.61-81.
Haroon, and et. Al, 2012. International portfolio diversification in developing equity markets of
South Asia. Studies in Business & Economics. 7(1).
Harms, P., 2012. International investment, political risk, and growth. Springer Science &
Business Media.
Tezanos Vázquez, S. and Sumner, A., 2013. Revisiting the meaning of development: A
multidimensional taxonomy of developing countries. Journal of Development Studies.
49(12). pp.1728-1745.
Spatafora, M. N. and Luca, M. O., 2012. Capital inflows, financial development, and domestic
investment: determinants and inter-relationships (No. 12-120). International Monetary
Fund.
Lakatos, C. and Walmsley, T., 2012. Investment creation and diversion effects of the ASEAN–
China free trade agreement. Economic Modelling. 29(3). pp.766-779.
Razin, A. and Sadka, E., 2012. Foreign direct investment: analysis of aggregate flows. Princeton
University Press.
Heikkilä, and et. Al, 2012. Empirical experiences of investment portfolio management in a
capital-intensive business environment: a dimension of strategic asset management.
International Journal of Strategic Engineering Asset Management. 1(2). pp.117-134.
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