WINDWARD INVESTMENT MANAGEMENT

Reflective Report: Windward Investment Management Case Study

Reflective Report: Windward Investment Management Case Study

Introduction

The case study titled Windward Investment Management is a detailed account of the company past developments and prospective future. By conducting an investigation in the case of Windward, we can get acquaintance with the growing challenges of the companies facing growth issues in the environment where innovation and dynamism is hallmark for progress and uncertainty prevails all the time. In such circumstances, the company is obliged to explore new avenues for growth in order to expand its customer base upon which company's longer sustainability lies. Founded as Registered Investment Advisory under the Securities and Exchange Commission, Windward has accumulated a combined asset base worth of $3.6billion as of 31st July, 2010. One can observe that even though, the management under the head of its founder have done a remarkable job, the company can still face growth issues. Thus, no matter in which business one is engaged, one should always be ready for situations faced by the investment company in the case under discussion. It is inevitable decision which every management must undertake and set the course for the future direction of the company (HBR Case Study, 2012)

Literature Study

Before analyzing the case, it was important to review certain literature theories that are relevant. It will somehow facilitate our analysis in one way or another. Many companies have adopted the financial models and theory as it is without encompassing the downsides associated with them which are also available in the theory. Literature has delineated the limits of each theory and defines the circumstances under which the theory will continue to be acceptable. However, the growing dynamics in the financial market has made it impossible to continue to avoid taking these limitations. As the complexity in the current financial market structure is increasing, there is a greater need for better model which has capacity to incorporate all the relevant information.

For instance, Portfolio theory uses the concepts of efficient frontier, beta, market line and capital market line. It presents the most complete model of asset pricing, or CAPM. In this model, the performance of an asset is a random variable and a portfolio is a weighted linear combination of assets. Therefore, the performance of a portfolio is also a random variable and has a mean and a variance (Francis & Archer, 1971). The model assumes that the double

The securities markets are efficient. This is the hypothesis of market efficiency that prices and asset returns are expected to reflect in an objective way, all available information on these assets.

Investors are risk-averse (as shown by Daniel Bernoulli); they will be willing to take more risks in exchange for higher returns. Conversely, an investor who wants to improve the profitability of its portfolio must be willing to take more risks. The risk / return balance judged optimal depends on the risk tolerance of each investor.

Contrary to the first assumption, we can observe that in the absence of perfect market conditions, securities market cannot be efficient. The point here to make is that no matter if its portfolio theory or ...