GLOBAL MACRO FUND

Construction and Management of a Global Macro Fund



Abstract

This paper represents the portfolio that consists of Bonds. For the construction of this portfolio we have selected 12 types of bonds. The fund was constructed on 2nd march, 2011. We have also analyzed the performance of the portfolio. Basically the whole portfolio consists of bonds that have different maturity dates but the coupon payment is received quarterly. The coupon payments will be used to appraise the performance. In the first part of the paper we will be discussing the investment objective, and then in the second part we discussed the methods to collect data and analyze the past performance of the bonds, that we will select for the portfolio construction. In the third part we will discuss methodologies used to identify the bonds for the construction of portfolio. In the last part we have analyzed the performance appraisal of the portfolio.

Table Of Contents

Introduction4

Part A: Types of Portfolio Strategies and Investment Objectives/Policies4

A. Passive Portfolio Strategy:4

B. Active Portfolio Strategy:4

C. Other types of Portfolio4

Investment Objectives and Policies5

Objectives5

Safety5

Credit Risk6

Interest Rate Risk6

Currency Risk6

Sovereign Risk6

Liquidity7

Yield7

Part B: Selection Methodologies8

Interest Rate Anticipation8

Valuation Analysis9

Credit Analysis10

Yield Spread Analysis11

Part C: Portfolio Construction Process11

Part D: Appraise the Performance of this Fund13

Construction and Management of a Global Macro Fund

Introduction

Europe's banking system is the largest in the world and holds consolidated assets three times those of the US system, and almost four times those of the Japanese. The outlook for the European banking sector looks bleaks for 2010 as the escalating European sovereign debt crisis places a cloud over the delicate recovery. Portfolio investment decision for this research examines ten companies from diverse industries in order to assess the impact of investment criteria on long term return maximization objectives.

Part A: Types of Portfolio Strategies and Investment Objectives/Policies

A. Passive Portfolio Strategy:

A strategy that involves minimal expectation input, and instead relies on diversification to match the performance of some market index. A passive strategy assumes that the marketplace will reflect all available information in the price paid for securities (Titman & John, 2010: 87).

B. Active Portfolio Strategy:

Active Portfolio Strategy uses available information and forecasting techniques to seek a better performance than a portfolio that is simply diversified broadly.

C. Other types of Portfolio

The Patient Portfolio:

This type invests in well-known stocks. Most pay dividends and are candidates to buy and hold for long periods. The vast majority of the stocks in this portfolio represent classic growth companies, those that can be expected to deliver higher earnings on a regular basis regardless of economic conditions.

The Aggressive Portfolio:

This portfolio invests in "expensive stocks" (in terms of such measurements as price-earnings ratios) that offer big rewards but also carry big risks. This portfolio "collects" stocks of rapidly growing companies of all sizes, that over the next few years are expected to deliver rapid annual earnings growth. Because many of these stocks are on the less-established side, this portfolio is the likeliest to experience big turnovers over time, as winners and losers become ...