JESMONDMIZZI

Building the right portfolio to meet your investment objectives

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Table of Contents• Definition of Portfolio Management• Investment Mandate• Investment Goals and Objectives• Investment Constraints• Risk Tolerance• Risk Profile• Asset Classes• Risk Return Trade-off• Asset Allocation• Optimal Portfolio• Diversification Benefits• Investing in Funds• Portfolio Rebalancing

Portfolio management is the art and

science of making decisions about

investment mix and policy,

matching investments to objectives,

asset allocation for individuals and

institutions,

and

balancing risk against performance

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INVESTMENT MANDATE

Investment Goals and Objectives Investment Constraints Risk Tolerance Risk Profile Optimal Portfolio

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Investment Goals and Objectives

• Return on Capital• Income• Growth• Balanced

• Level of Risk• Willingness• Ability

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• Financial Ability

• Liquidity Concerns

• Investment Horizon

• Personal Preferences

Investment Constraints

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…what determines investor

RISK TOLERANCEgoes beyond the

personality factors

Age

Income

Gender

Education

Number of Dependents

Culture

Research highlights that…

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RISK PROFILE

RISK SEEKER

RISK NEUTRAL

RISK AVERSE

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Asset Classes

CASH & CASH EQUIVALENTSHighly liquid

Low Risk, Low Return

FIXED INCOMEDebt investment

Interest Payment (Coupon)

EQUITIESOwnership to a private or public companyDividend payment

ALTERNATIVE INVESTMENTS

Real Estate, Commodities

The Building Blocks to Portfolio

Construction

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Risk Return Trade-offthe balance between the lowest possible risk and the highest possible return

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• Strategic Asset Allocation aligns the identified objectives and constraints with the long run market expectations to define the asset class weightings

• Tactical Asset AllocationActive portfolio management to gain from

unexpected investment opportunities

Asset Allocation

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The Optimal Portfolio

Investment Objectives

Market Expectations

Risk Tolerance

Conservative • A risk-averse investor would be allocated a higher

weighting to cash and money market instruments and investment grade bonds (IGB), with a lesser percentage in equity stocks

Moderate• An investor who falls between the two extremes

would be allocated a balanced investment between equity and fixed income securities

Aggressive• A risk seeker with low liquidity requirements and

a long term horizon is allocated a portfolio that is dominated by equity stocks

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Diversification Benefits

Diversifying BETWEEN and ACROSS different Asset Classes

and

choosing assets with NON PERFECT CORRELATION

lowers the SPECIFIC Risk

Leaving the investor primarily exposed to

MARKET Risk

PORTFOLIO RISK

SPECIFIC RISK MARKET RISK

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Advantages: Diversification Lower transaction

costs Liquidity

Investing in Funds

A Fund represents a pool of funds collected from different investors to be reinvested across different securities

to yield a return

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Portfolio Rebalancing

Portfolio management implies continuous asset allocation rebalancing in line with changes in investors’ circumstances andmarket conditions to ultimatelyachieve the investment objectives

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Thank you