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Assignment 2 (100 marks)
Case study
The following questions are based on the case study ‘Tex Matdasu case study’ which is available to
download from the ‘Assessments’ tab in KapLearn.
Question 1 Efficient market hypothesis
(10 marks | Word limit: 300 words)
LO2 Analyse Efficient market Hypothesis (EMH) with respect to the empirical evidence for it and its
usefulness and applications for the provision of investment advice.
LO3 Critically analyse a client’s investment objectives and constraints.
Briefly explain how your research and views of the efficient market hypothesis (EMH) from Assignment 1
relates to this client scenario?
Note to students: Students should reference the two (or more) articles that were reviewed in Assignment 1
and link these to the unique circumstances of the client Tex Matdasu, as well as to the current funds in the
portfolio and the asset allocation weightings in the ABC Super portfolio.

Question 2 Asset allocation
(17 marks | Word limit: 750 words)
LO4 Apply knowledge of asset classes, investment markets and tax in providing expert investment advice.
LO5 Critically analyse the different investment structures and fund managers available to retail investors.
LO6 Conduct appropriate quantitative and qualitative research in recommending suitable investment
strategies and products.
(a) (i) Discuss the benefits of including fixed income in Tex’s portfolio? (2 marks)
(ii) Select one fund from the Australian fixed income APL and one fund from the international
fixed income APL and provide reasoning and justification for their inclusion in Tex’s portfolio.
In your answer, address Tex’s concerns regarding investing in fixed income. (4 marks)
(iii) Briefly discuss the problems with the benchmark indexes (risks) of the international fixed
income asset class and the currency hedging issues that can arise. (2 marks)
(b) (i) Tex stated that he is ‘too scared’ to invest in alternative investments as he has been told they
are ‘too volatile’. Describe how you would explain to Tex why alternatives investments can be
of benefit within a portfolio. In your response, specifically discuss the concepts of risk and
diversification. (3 marks)
(ii) Review the Partners Group Global Value Fund (AUD) Wholesale Fund (APIR code: ETL0276AU)
PDS and provide three arguments for or against potential inclusion of this fund in Tex’s ABC
Super portfolio. (3 marks)
(iii) Describe two issues you have identified in relation to the property component of Tex’s
portfolio and explain what you would do to address these issues. (3 marks)

Question 3 Platforms and products
(10 marks | Word limit: 400 words)
LO4 Apply knowledge of asset classes, investment markets and tax in providing expert investment advice.
LO5 Critically analyse the different investment structures and fund managers available to retail investors.
LO6 Conduct appropriate quantitative and qualitative research in recommending suitable investment
strategies and products.
(a) (i) In the current environment in which most asset classes are offering historically lower returns,
Tex is very aware of the need to reduce the costs of investing. Discuss the advantages and
disadvantages of using a fund manager compared to investing directly. (2 marks)
(ii) Create a table showing the indirect cost ratio (ICR) and the one-year, three-year and five-year
performance of the funds currently in Tex’s ABC Super Fund. What conclusions can you draw
from your review? (4 marks)
Note to students: This information can be obtained from the monthly reports from the funds
or platforms such as Morningstar and Netwealth. Provide the month-end date upon which the
data is based.
(b) Tex’s friend, Lachlan, has built up a large share portfolio outside of superannuation using margin
lending. Lachlan has constantly increased the level of borrowing attached to the portfolio until he
reached the maximum level prescribed by the margin lender. He tells Tex that this strategy worked
well for a number of years, but he has recently been hit with a margin call. Lachlan has no other
assets other than the portfolio and reveals to Tex that he is concerned about losing much of the
capital in his portfolio.
Tex asks you to explain the pros and cons of margin lending.
Required:
(i) Identify two (2) advantages and two (2) disadvantages of gearing. (2 marks)
(ii) Describe three (3) ways investors can meet margin calls. In your response include a discussion
of which of these strategies Lachlan will most likely employ. (2 marks)

Question 4 Tactical asset allocation
(11 marks | Word limit: 600 words)
LO1 Evaluate investment advice processes and frameworks in the delivery of quality investment advice to
retail investors.
LO4 Apply knowledge of asset classes, investment markets and tax in providing expert investment advice.
(a) (i) Tex’s current asset allocation approach is to rebalance his portfolio weightings to the ABC
Super portfolio weightings on a six-monthly basis. Identify the key differences between this
approach and a ‘buy and hold’ approach. (2 marks)
(ii) Looking at Tex’s portfolio, briefly discuss whether or not this strategy has worked. (2 marks)
(b) (i) As an adviser, you believe you can provide value to clients through an active asset allocation
approach (tactical asset allocation (TAA)). Identify issues that you should consider when
adopting the TAA approach, compared to strategic asset allocation (SAA), which rebalances to
target allocations on a periodic (e.g. quarterly) basis. (2 marks)
(ii) How well does Tex’s current ABC Super portfolio meet the proposed agreed SAA? (1 mark)
(c) It has been reported that residential property prices have declined 10% over the past year and banks
are restricting credit for housing loans.
Some economists are forecasting that the Reserve Bank of Australia will continue to reduce interest
rates from the current record low level of 1.0 % due to the high levels of household debt and low
wages growth. Against this backdrop, the US Federal Reserve is predicted to keep US interest rates
steady, in the range of 2.25–2.5%.
Required:
Discuss some ways in which TAA might be used in this situation given these expectations.
Note to students: For this question, you are required to provide recommendations on how you
would adjust the weightings for each asset class in the SAA provided in the case study. (4 marks)

Question 5 Passive versus active funds
(10 marks | Word limit: 450 words)
LO2 Analyse Efficient market Hypothesis (EMH) with respect to the empirical evidence for it and its
usefulness and applications for the provision of investment advice.
LO3 Critically analyse a client’s investment objectives and constraints.
As an adviser, you prefer the use of active funds. Considering Tex’s preference for index funds, what points
would you discuss with Tex to persuade him to consider more using active funds rather than index funds?
In your response, identify issues with the active funds currently in Tex’s portfolio.
Students should provide some examples and conduct some analysis of the funds in Tex’s portfolio and on
the APL.
Student should reference the readings on EMH from Assignment 1

Question 6 Core-satellite versus blended approach
(23 marks | Word limit: 900 words)
LO3 Critically analyse a client’s investment objectives and constraints.
LO5 Critically analyse the different investment structures and fund managers available to retail investors.
LO6 Conduct appropriate quantitative and qualitative research in recommending suitable investment
strategies and products.
(a) On his second visit, Tex tells you he has done further reading on portfolio construction and wants
more information about the core-satellite approach and the style-blending approach.
(i) Provide a brief description of these two strategies and, with reference to Tex’s current
portfolio, explain and justify whether a core-satellite or style-blending approach is currently
being used for each of the asset classes in which he is invested. (4 marks)
(ii) With reference to Tex’s needs and objectives and personal preferences, provide a brief
discussion on which asset classes in his SAA would be more suited to a core-satellite approach
and which would be more suited to a blended approach. Your reasoning should be
incorporated in your response. (3 marks)
(b) (i) The Perpetual Wholesale Australian share fund is described as an Australian large-cap value
fund. Review information on the fund, such as the PDS, fund profile and website, and describe
the key characteristics of its investment process and investment philosophy. (2 marks)
(ii) Do you expect this style of fund to outperform or underperform over the next 12 months?
Provide reasons in your answer. (2 marks)
(c) (i) Tex has stated that he is interested in having some exposure to socially responsible funds.
Many funds claim to be socially responsible. What are the key characteristics that you would
look for when determining whether or not a fund is socially responsible? (3 marks)
(ii) Provide a recommendation for a socially responsible fund listed on the APL that would be
appropriate for Tex. Justify your recommendation. (3 marks)
(d) (i) When blending investment styles, it is important that the chosen fund sticks to its stated
investment process and style. Discuss style drift and how it can be monitored, and the asset
classes in which it is most common. (3 marks)
(ii) Recommend another fund from the APL that could be used in a style-blending strategy. Justify
your recommendation. (3 marks)

Type Of Service: Academic Paper Writing
Type of Assignment: Research Paper
Subject: Investment
Pages / Words: 31/8500
Number of sources: 10
Academic Level: Junior(College 3rd year)
Paper Format: Harvard
Line Spacing: Double
Language Style: AU English

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