Financial Portfolio Performance Measurement and Strategy Review

This report provides a comprehensive analysis of a financial portfolio's performance. It begins with a comparison of the portfolio's gross and active returns against a benchmark, including the Russell1000. The report then outlines the original portfolio strategy, which focuses on long equity positions within the New Zealand market, with investments in sectors like investment banking (Goldman Sachs), IT, and pharmaceuticals. The discussion section evaluates the portfolio's performance, noting negative returns from investments in IBM and Goldman Sachs, while highlighting positive returns from Visa and Microsoft. The analysis emphasizes the importance of diversification, including commodities and energy sectors, to mitigate risk. The report concludes with a discussion of an "Optimum Portfolio" and potential improvements such as arbitrage strategies and diversification into smaller companies, to test financial theories and predictions in real-world scenarios. The portfolio strategy is based on market analysis and aims to maximize returns while managing risks.

Portfolio Performance Measurements
My Portfolio Benchmark: Class Portfolio Benchmark: Russell1000
Gross return -5.7336% -18.6757% 12.9420%
Active return 0.5571% -18.6757%
Excess return -6.3225%
Std Dev (Excess) 6.6194%
Portfolio Beta
against
-0.7178 0.7956
Tracking Error
against
6.7453% 6.6194%
Sharpe Ratio -0.7178
Treynor against -2.8214 -0.0795
Jensen against -0.0003 -0.1615
Information Ratio
against
0.0826 -2.8214

Original Portfolio Strategy
This portfolio strategy comprise of all the equity undertakings having long position expecting that
the market will gain in the future. I have made this strategy after analysing the NZ market over a
long period of time and overall market trend.
I have invested all my money in the NZ market itself relying that it will give me fruitfull results and
increase my net worth. I don’t allow myself to invest in any foreign market.
I have focussed on the investment banking companies in the market as these companies has its own
stock analysts who invest wisely in the market and earns well and gives better returns to their
investor. I invest approximate 22% of my investment in Goldman Sachs Group INC. Another industry
is the IT industry where I have invested the equivalent amount of my portfolio because IT industry is
the growing industry and have more chances of growth.
Another sector which have an impact on my portfolio is Pharmaceutical Industry in which I have
invested approx. 15% of my whole portfolio. It is the sector which will hardly face any recession, it is
always a growing sector due to new inventions for the diseases. It is not a part of luxury rather it is
the necessity of the life.
Rest of the portfolio is bifurcated into different sectors of the economy which has will do better at
the time recession as well. The shares of these companies is used as a hedge instrument at the time
recession as these will do better.

Portfolio Performance discussion
As per the current portfolio -73% of portfolio gives negative return which majorly on account of
Investment in IBM and Goldman Sachs. IBM is part of IT sector and we all know growth in IT sector
are now very slow or it is at their saturation level, also there is very cutthroat competition in market.
So expecting a high return in IT industry is not a good option.~23% investment in Goldman Sachs is
also decline the overall portfolio return, In banking sector always there is a risk of public expectation
and if there is any unprofitable investment made by these Investment banking companies than it will
impact their brand value so IB companies are always high risk investment. But the loss in IT and IB
companies is normalized by the investment in VISA Inc and Microsoft these two company give very
healthy return. We need to normalise our risk by investing in Big giants like Microsoft, Apple etc.
these companies always have scope for Inorganic growth. We should diversify our portfolio in
commodity market as well because people always choose one option between Shares and
Commodity if shares are not performing well than they shift their investment to commodity market
So to mitigate or minimize the risk we should diversify our portfolio in all sector.
We can also look for energy sector as in future it will grow like anything. Today most of the country
try to invent new ways to generate electricity so there is great scope of return in these sector

Optimum Portfolio
I am satisfied with my portfolio strategy and I have considered all the necessary factors while
investing in any sector. In my opinion, my current portfolio is an optimum one to some extent.
Political, Economical and other risk could affect my portfolio and I have taken a risk for the same.
One thing I can change in my Portfolio is that I can take multiple positions to arbitrage my profit/ loss
or I can use different Portfolio strategy involving multiple buy or multiple sell positions through
which I can increase the chance of having profits.
Further I can also diversify my portfolio by investing in small companies which has chances to grow
in the near future. It will give strength to my portfolio. This portfolio will help me to test my theories
and predictions in real life and see for myself how accurate my forecasts were.