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Sarkar indicates that there are two alternate methods

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Sarkar indicates that there are two alternate methods to implement the investmentapproach favored by Hayes:Method 1Under this method cash in the portfolio is equitized using a long futures position. Thecash is invested in short to medium term fixed income securities.Method 2The manager will only invest in stocks that are expected to outperform the index. If themanager has no opinion on a stock, or if the stock is expected to underperform, then thestock will not be included in the investment portfolio.Bayside FoundationThe investment policy committee for Bayside Foundation follows a fairly conservativeinvestment strategy and pays particular attention to the minimization of tracking error.Bayside seeks to achieve two specific objectives:Objective 1Invest a portion of the portfolio in an index with a large cap bias. In addition tominimizing tracking error, Bayside would also like to ensure that the index strategyinvolves minimal rebalancing costs.Objective 2Allocate another portion of the portfolio so that it earns alpha associated with small capstocks but without the associated small cap market beta exposure.第 10 页,共 30 页
Daniels Corporation Pension PlanDaniels Corporation wishes to allocate a portion of its pension portfolio to an activemoney manager with a value investment style. Sarkar has collected information on threeactive portfolio managers and will recommend one of them to Daniels. Selectedinformation for the three managers is presented below in Exhibit 1.Exhibit 1Investment Manager DataDecember 31, 2009ManagerManagerManagerABAssets under management ($ millions)2,8763,7524,619P/E8.717.523.1Dividend yield3.50%1.70%1.00%EPS growth (5-year projected)6.75%5.25%14.50%Portfolio active return3.50%3.00%4.30%Portfolio tracking risk5.00%1.50%6.00%Style fit87.00%95.00%85.00%19.In order to meet the objectives of Hayes University Endowment, themostappropriate investment approach is an:C
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Term
Fall
Professor
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Tags
Test, The Land, Chartered Financial Analyst

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