Fund Operations & Risk Management - Accounting and Finance Assignment Help

Assignment Task

CA Brief – Fund Administration 2023

You are a Fund Manager working for a large Mutual Fund House. Your fund invests in equities, mostly in the US but small exposure to other countries.
Your fund:
denominated in USD has outperformed its benchmark index is actively managed charges fees Working for you are a team of fund analysists.
They have just submitted trade recommendations, targets and documentation to support their views for the next 12months. In particular, they have identified 2 stocks within your fund – Stock X and Stock Y that they believe are due for a corrective move in the very short term.
Stock X anticipate a move lower
Stock Y anticipate a move higher

As Fund Manager you agree with their findings and analysis and have made funds available to reposition the fund.
Trade Details
• $ 300,000 to invest ($ 150,000 x 2)
• investment route is the derivatives market
• investment period is 12 months
• allocate 100% of available funds
• Stock X is an actual stock within your fund
• Stock Y is an actual stock within your fund

NOTE
This is a derivatives piece. Choose a fund that includes stocks (for Stock X&Y) with readily available option premium data. (e.g. yahoofinance.com)
(Option premium prices close to the 12mth date will suffice)

PART A
Identify a fund based on the criteria above and present a professional Fund Fact Sheet.
The Factsheet will include (but is NOT limited by)
• fund characteristics
• where and in what sectors the fund invests
• fund ratings
• fund risk and return
• past fund performance
• fund fee structure

NOTE
This is a ‘real life’ fund managed by an International fund shop that markets and manages mutual and collective investments.
Choose your fund carefully and wisely (you will need to access actual option premium data)
Stock X&Y (in PART B) will be actual stocks within this fund

PART B
Using derivatives clearly demonstrate how you would position the fund for the anticipated moves in Stock X and Stock Y.
Option Position for Stock X
• Comment on Stock X’s 12mth outlook as recommended by your team
• Using actual option premiums, position for an anticipated move to the downside using derivatives over the investment period.
• Detail pay-out profiles and tables
• Put a hedge in place
• Use Scenario Analysis for different outcomes at expiry
• Explain why your strikes were chosen and the method used to spread the investment.
• Explain what kind of strategy you are employing. E.g. passive, aggressive, covered etc.
Option Position for Stock Y
• Comment on Stock Y’s 12mth outlook as recommended by your team
• Using actual option price data, position for an anticipated move to the upside using derivatives over the investment period.
• Put a hedge in place
• Detail pay-out profiles and tables
• Use Scenario analysis for different outcomes at expiry
• Explain why your strikes were chosen and the method used to spread the investment.
• Explain what kind of strategy you are employing. E.g. passive, aggressive, covered etc.

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