GAA Investment Associate Project
Please keep calculations in the excel file and be prepared to walk through the file as you present results.
1.) Using this same data set, calculate the annualized return and annualized standard deviation of a portfolio containing 40% S&P 500, 20% MSCI EAFE, 20% US Aggregate Bond, 15% Citi Non-US Bond, and 5% 30 Day US TBill. Assume the portfolio is rebalanced monthly.
2.) Using a 10-year trailing estimate of the covariance matrix for the 4 asset classes (excluding US TBills), calculate the Marginal Contribution to Total Risk (MCTR), Contribution to Total Risk (CTR), and Percent Contribution to Total Risk (% CTR) for each of the relevant asset classes in the portfolio from Question 2. What weights will result in the “Risk Parity” solution for the portfolio (again ignoring US TBills)?
3.) The Putnam Investors Fund (003) has the S&P 500 as its benchmark, a cap-weighted index. In the worksheet “S&P 500 Bottom Up”, you will find various data for all 500 constituents of the S&P 500 including sector, number of shares held in portfolio 003, stock prices as of 6/30/09 and 7/31/09, and market capitalization.
(a) Calculate the return of portfolio 003 for July (ignore dividend income)
(b) Calculate the return of the S&P 500 for July (again ignore dividend income)
(c) What was the active return for the portfolio in the month of July?
(d) Calculate the returns for each of the ten sectors for July. Which sector performed the best and which sector performed the worst?
(e) As of 6/30/09, the portfolio was most overweight and underweight which sectors?
(f) Perform a sector attribution of the active performance of the portfolio. How much of the active return can be attributed to asset allocation, stock selection, and interaction?