Portfolio Construction and Management for Corporate Sports Australia

This report focuses on portfolio construction and management for Corporate Sports Australia. It begins with an introduction to investment portfolios, emphasizing their importance. The report provides an overview of Corporate Sports Australia, including its investment history and need for an effective portfolio. It details the company's investment policy statement, capital and asset allocation strategies, and the rationale behind them. The suggested portfolio includes a mix of debt and equity securities, with diversification strategies. The report also includes a performance analysis of the suggested investment portfolio, comparing its performance to an alternative benchmark. Finally, the report concludes with recommendations for Corporate Sports Australia's portfolio management.

Portfolio Construction and
Management
With Special Reference To Corporate
Sports Australia
Student Details

PORTFOLIO CONSTRUCTION AND MANAGEMENT
Contents
Introduction......................................................................................................................................3
Need of an Effective Investment Portfolio..................................................................................3
Corporate Sports Australia: Overview.........................................................................................3
Company’s History of Investment...............................................................................................4
Investment Policy Statement of the Company.................................................................................4
Effective Policy Statement..........................................................................................................4
Capital and Asset Allocation Strategy.............................................................................................6
Capital Allocation Strategy..........................................................................................................6
Capital Allocation Mix................................................................................................................7
Asset Allocation Strategy............................................................................................................8
Asset Allocation Mix...................................................................................................................9
Justification of Asset Allocation Mix..........................................................................................9
Investment Portfolio of Corporate Sports Australia Company........................................................9
Debt Securities in the Portfolio..................................................................................................10
Share of Equity Securities in the Portfolio................................................................................13
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PORTFOLIO CONSTRUCTION AND MANAGEMENT
Diversification in Investment Portfolio.....................................................................................14
Reason behind the Specified Portfolio......................................................................................15
Tracking the Performance of suggested Investment Portfolio......................................................16
Portfolio’s Performance as Per Weeks of August and September Months...............................17
Performance comparison with Internet Cash Maximiser..........................................................18
Conclusions and Recommendations..............................................................................................18
Bibliography..................................................................................................................................20
Figures
Figure 1 Pie Chart Showing Required Cash Allocation of the Company.......................................9
Figure 2: Bar Graph Is Showing the Asset Allocation of Corporate Sports Australia Company. 12
Figure 3: Showing Investment portfolio of Corporate Sports Australia........................................18
Figure 4: Showing performance of company’s portfolio in weeks of August and September
Month.............................................................................................................................................19
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PORTFOLIO CONSTRUCTION AND MANAGEMENT
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PORTFOLIO CONSTRUCTION AND MANAGEMENT
Introduction
Investment is the deposition of excessive money in the best investment options that will give a
good profit to the company and bear the minimum risk. Available investments options mainly
include investment in stocks, insurance, bonds, mutual funds, and debentures.
The combination of different investment options in the right percentage that will give great
returns to an individual in minimal risk has called an effective investment portfolio (Chandra,
2017). It is different for every individual and for every organization, as it was based on the
capability and the risk-taking factor of the individual and entity.
Need of an Effective Investment Portfolio
Construction of a portfolio helps in planning to invest in the variety of funds that will work
together in order to meet all requirements of the investor at a time. It has always suggested that
the investee should analyze the elements of a portfolio before the actual investment (CFI, 2019).
It is so because this will help them in reducing the chances of risk and an increase in the
percentage of profits. The more involvement of risk in the portfolio gives the individual or
companies the more profits and vice-versa.
Corporate Sports Australia: Overview
The company is serving in Australia and has a market of leading the buying power of creating
the best and biggest experiences of hospitality (Australia, 2015). This attracts and reinvigorates
the company’s key business rewarding relationships with loyalty and outstanding performance.
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PORTFOLIO CONSTRUCTION AND MANAGEMENT
Till now the company was investing in a internet cash maximize account offered by Regional
Australia Bank, however the rate of interest they are getting was very low.
Company’s History of Investment
The company is making a good amount of profits in the market and it was not having a good
option for investment purposes. Earlier the company was investing through an account of
internet cash maximizer, which is a part of Regional Australia Bank (Regional, 2019). However,
their rate of return was very low ranging from 0.65 % to 1.75 % per annum. This leads the
company to look forward to investment in an effective portfolio that may give the desired results
to the company. This report is going to identify the best possible options for the company by
providing it an effective investment portfolio and its pros and corns.
Investment Policy Statement of the Company
Corporate Sports Australia is in need of an effective portfolio that may give the desired results to
the company. This can also help the company to get a competitive advantage over other
competitive companies. An effective portfolio will help the company to get to know about the
working of various investment options and help them to relate it to their personal investment
objectives (Spears, 2010). This will help the investee to attain more profits and keep the risk
factor minimum. This can be done with the help of an effective investment portfolio option.
Effective Policy Statement
One can also select the portfolio according to the extent until they can bear the risk and enjoy
higher profits. One should take care of some factors, which are mentioned bellow.
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PORTFOLIO CONSTRUCTION AND MANAGEMENT
Source: Some Basic Requirements of an Investment Portfolio (Dannemiller et al., 2017)
a. Liquidity Requirements: It is a quick and easy availability of cash or liquid asset of the
company. While deciding a portfolio, it is the responsibility of the company to identify such a
portfolio, which is able to maintain an adequate level of cash availability whenever required.
b. Return Requirements: The appropriate amount of return an investor required to deposit in his
account. At the time of investment when an investor invests in some kind of portfolio, its main
requirement is to get maximum return from the portfolio by involving minimal risk factor.
c. Risk tolerance: The investor should take care properly of another factor that is risk tolerance. In
this, the investor after taking care of required return it identifies the involvement of risk in the
portfolio (Dannemiller et al., 2017). The investor should measure the amount of risk involved in
the investment through portfolio before only.
d. Time horizon: The return and risk level both indirectly is connected to the period. More is the
period less is the risk and return may depend on types of investment. Time horizon sets the
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PORTFOLIO CONSTRUCTION AND MANAGEMENT
required period of investment in which the invested amount be increased based on some fixed or
variable interest.
e. Tax considerations: The money someone earns is always taxable. Some investment options
allow a user to invest in them and get tax rebate up to some extent. Tax rebate is fixed by the
concerned government depends upon the types of deposits.
f. Regulatory and legal considerations: There are many laws and regulations implied by the
concerned government and other regulatory bodies on the investment decision to be made by an
individual or a company. These regulations are there to protect the interest of the investor so that
in any circumstance the interest of investor and investee cannot be compromised or neglected.
g. Unique needs and circumstances: Some unique circumstance exists in some investment
options. It can be related to investment in a combination of the right amount to equity and debtor
in long-term securities will help the investor to earn more.
Capital and Asset Allocation Strategy
There are some capital allocation strategies that a company can follow and can decide upon their
best investment portfolio. Capital allocation strategies involve Mergers and Acquisitions,
Investment in organic growth, purchase, and sale of shares, mutual funds investments, etc
(Hoesli & Macgregor, 2014). on the other hand there are also some asset allocation strategies
that allow an individual to invest in debt and equity based on some percentage classification of
companies assets.
Capital Allocation Strategy
The money that is earned by the company is decided to be invested in some option then it is
known as capital allocation. It is the important allocation process as it deals with the completely
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PORTFOLIO CONSTRUCTION AND MANAGEMENT
earned capital of the business (Institute, 2015). It is a very big deal for businesses to invest in
such a place, which can give them good returns and involves minimal risk.
The capital allocation strategy suggests that the investing company or an individual should
follow some set steps to get maximum returns from their investment. These steps measure the
capital to be invested, identify available allocation options, measure the involved risk factor,
distribute the investment according to available options, allocate capital in selected options,
measure the standard amount with the investment plus interest amount, earn profits in the end.
Capital Allocation Mix
Figure 1 Pie Chart Showing Required Cash Allocation of the Company
It is advised to organizations and individuals not to invest the complete amount in a single
investment option. It is always said that one should invest in a combination of investment options
in order to minimize the risk level and increase in the profit margins. In this study, an attempt is
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Particulars
Debt: 50%
Equity: 30%
Cash: 20%

PORTFOLIO CONSTRUCTION AND MANAGEMENT
made to provide a statement for capital allocation strategy for the selected company that is
Corporate Sports Australia.
Capital allocation for Corporate Sports Australia is suggested to be the appropriate combination
of equity and debt in some particular percentage. As per the company’s profit margins and
monitory conditions of dealing with a moderate level of risk, then the best combination of capital
allocation can be more of debt and less of equity (Omisore et al., 2012). The company can
choose to allocate its capital partially in debt, equity and rest as direct cash in the ratio of 5:3:2
respectively. It means debt can be 50%, equity has to be 30% and the remaining will be invested
as a liquid amount in banks or other financial institutions (Pastor & Stambaugh, 2010). The
decision is based upon prevailing economic conditions and implemented government policies
and laws.
Asset Allocation Strategy
When a company decides upon the right measure of its capital allocation, it is important for the
company to select an appropriate asset allocation strategy. Corporate Sports Australia has
selected such type of capital allocation strategy that involves moderate risk as the large amount is
going to be invested in debt. Debt gives a fixed amount of interest and involves less risk. Then
for more return purpose, more amount is suggested to be deposited in equity as compared to keep
as liquid cash. The ratio between debt, equity and cash were 5:3:2. These margins of debt and
equity based on the amount of risk a company can manage and the level of profit it is expecting.
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PORTFOLIO CONSTRUCTION AND MANAGEMENT
Asset Allocation Mix
Non-liquid assets of the company further need to be distributed in a fixed amount between debt
and equity purely. It is based on the need of the company, the capability and caliber of the
company to bear the level of risk involved in the investment and the last thing however a most
important one is the urge of the company to earn from its investments. It does not include liquid
cash as investments.
In this way, the company will be able to earn good investment returns. It is advised to the
company to invest in such a portfolio, which has more ratio of debt as compared to equity. As
investment in debt involves low or no risk on the other hand investments in equity involves high
risk. Corporate Sports Australia Company can invest in a portfolio that will be a combination of
70% debt and 30% equity.
Justification of Asset Allocation Mix
It can be seen from the point of view of Corporate Sports Australia Company that the company is
earning an appropriate amount of profit and looking forward to investing in some high yielding
options that must be involving a moderate amount of risk. The risk the factor is moderate as the
company is an earning quite well however it is not making a high margin of profits. According to
the company’s market conditions and prevailing economic situations, it is best for the company
to invest in such a portfolio (70% debt and 30% equity) that involves low risk and high or
moderate profit margins.
Investment Portfolio of Corporate Sports Australia Company
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PORTFOLIO CONSTRUCTION AND MANAGEMENT
Debt Equity
0
10
20
30
40
50
60
70
80
Investment
Investment
Figure 2: Bar Graph Is Showing the Asset Allocation of Corporate Sports Australia
Company
As in the above lines, the percentage distribution of debt and equity has already identified that is
70% of debt share and 30% of equity share. This section of the study is going to look into the
distribution of available investment options in debt and equity as per the required investment
percentage. There are various options available in both types of investments. For particularly
Corporate Sports Australia Company a brief explanation of investment options in debt and equity
are going to be discussed in the following lines.
Debt Securities in the Portfolio
In the company’s investment portfolio, it is suggested that the portfolio should contain 70% of
debt securities; on the other hand, the proportion of equity is fixed to be 30%. From 70% of debt
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