Investment in Stocks
Given the situation below, please assist me on how to construct an international investment portfolio in order to meet below requirements. Please be very specific on where to invest, (e.g. give specific equity name and bonds name). It will also be very helpful if you can provide literature to support your guidance.
You have just been appointed as a fund manager for a multinational firm, with the task of increasing the valuation of the company by 10 percent through international investment. You have been given the sum of GBP100 million to obtain your objective. Your task is to construct a portfolio of international investment that can achieve your objective of increasing the value of the company by 10 percent. In your discussion you should discuss your choice of securities (stocks, bonds, financial derivatives, funds, indices and other financial instruments), and your selection of countries in the portfolio. You should mention the strategy, construction, management and country risk investment of your portfolio in your answer.
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The objective of the investment is to achieve 10 percent growth in the value of the company. This objective means that the company cannot invest only in fixed income securities or bonds. Financial derivatives can earn 10 percent or more but these have some pitfalls. The phase lock in phenomenon can make derivatives un-hedged and can lead to substantial losses. In addition, leverage can slap large losses from derivatives, there can be severe counter party losses, and large notional value can lead to losses that can hamstring our company. Mutual funds are also not advisable because these are diluted through diversification, result in poor performance, and have high fees and expenses. It will be difficult to achieve 10% increase in company value through these funds. Similarly, in the case of index investing, there is only average performance, therefore it will be difficult to achieve 10 percent increase in value. Also, with index investing, there is little protection, and no control over the holdings. The best form of investment in order to increase the valuation of the company is stocks. It will enable higher increase in value. Stocks are easily accessible, they can be sold at stock exchanges, and offer the benefit of setting off losses against gains for the purpose of ...
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