Assignment in Finance (Essay Sample)

Assignment in Finance Part A – Client’s Requirements (Short and Long Term) and Preferences The short-term requirement of the client is to see some growth in the portfolio once they invest. Seeing growth in their investment portfolio is desired than holding these cash and cash equivalents in liquid sources. The client wishes the money to remain invested for at least 10 years. This signals a long-term goal in the form of a nest egg inheritance for the twins they are expecting later in the year. A nest egg inheritance for their children could also be earmarked as a retirement plan since they currently have no private pension arrangements. Additionally, the client is keen on investing in a portfolio that includes investments that reflect their concerns about the environment. Members in the public are today increasingly aware of the impacts of climate change and the devastating impacts it poses for future generations (Stanley, 2023). Investors who are keen on climate change, prefer investing in organisations that adopt sustainable business practices that reduce their impact on the environment (Stanley, 2023). As a result, some of the investments in the portfolio must reflect this. Part B – Portfolio Investment Strategy Investing the £20 million for the client must be guided with a well-defined investment strategy. A great portfolio investment strategy must be guided by several components including financial goals, risk tolerance, investment style, and asset diversification (Zhang, 2023). The financial goals of the client are described in Part A, both short-term and long-term. The client’s risk tolerance is 20%, indicating a moderately conservative approach to risk. The investment style to be adopted is passive investing where market indices would be tracked through EFTs or index funds. Risk will be assessed by monitoring beta, Sortino ratio, standard deviation, and Sharpe ratio. The investment strategy will adopt a hybrid portfolio offering increased diversification across the classes of assets or investments. Additionally, the investment strategy will be guided by professional advice from the investment manager managing the portfolio. Such advice is critical for continuous learning, portfolio review, taxation aspects, and portfolio rebalancing. Part C – Portfolio Composition The investment strategy identified through the client suggestion is a hybrid portfolio. A hybrid strategy utilises different assets, stocks, and bonds to achieve a balance between risks and returns (Abraham, 2023). The portfolio is divided into three major asset classes including bonds (50%), equities (40%), and commodities (10%). The client has already indicated their preference for green bonds due to their environmental concerns. Some of the green bonds in the UK market that could be included in the portfolio are Network Rail, Transport for London, and The Crown Estate. Each of these bonds fund environmentally friendly ...