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Part C Qualitative (max 1500 words, including tables):
1) What statistics (obtained in part A and B) should Thompson emphasize? What
characteristics of the ProIndex and ProValue funds will likely attract an institutional
endowment? Write your solution to this question in a maximum of 2 pages. Use bullet
points if required.
2) Propose your final recommendations to invest the $20 million endowment to Mr. Peter
Landman and the college investment board in a letter. Answer this question in a one-page
letter. Please pay attention to format and grammar. Lack of professionalism or poor writing
may be penalized.
NO AI / NO PLAGIARISM
For your reference, here’s what has alrerady been answered in the EXCEL file. JUST ANSWER THE TWO FIRST QUESTIONS (PART C).
Part A: Quantitative Analysis
TAM currently runs two funds: ProIndex and ProValue. You are tasked to analyze the return
and risk of both funds as follows:
A1.: Compute the return and risk of the ProIndex Fund and its Index benchmark. Build new
columns with the returns of the fund, the return of the benchmark and the difference in
returns.2
A2.: Compute the following return and risk metrics for ProIndex and its index benchmark.
Present all your results in a table format:
1. Average Daily return
2. Annualized Daily Return
3. Daily Standard Deviation
4. Annualized Standard Deviation
5. Correlation (among ProIndex and its index bechmark)
6. Beta
7. Sharpe Ratio
8. Treynor’s Ratio
9. Jensen’s Alpha
10. Daily Tracking Error
11. Annualized Tracking Error
12. Information Ratio
A3. Compute the return and risk of the ProValue Fund and its Index benchmark. Build new
columns with the returns of the fund, the return of the benchmark and the difference in
returns.
A4.: Compute the following return and risk metrics for ProValue and its index benchmark.
Present all your results compiled in a table:
1. Average Daily return
2. Annualized Daily Return
3. Daily Standard Deviation
4. Annualized Standard Deviation
5. Correlation (among ProValue and its index benchmark)
6. Beta
7. Sharpe Ratio
8. Treynor’s Ratio
9. Jensen’s Alpha
10. Daily Tracking Error
11. Annualized Tracking Error
12. Information Ratio
Part B: Quantitative Analysis
TAM’s investment strategy in the ProValue fund includes changing the weights of the
current assets AND/OR adding to more assets. Your role is to analyze different levels of
investments in this fund or, in other words, find the optimal weights that Thompson should
invest in each financial asset to meet the expected return (keeping risk under control). Your
desired expected return is 25% minimum. How, if at all, should Thompson rebalance the
ProValue fund?
B1. Find the optimal portfolio based on Markowitz Modern Portfolio Theory. Do NOT
include the two new potential financial assets in this analysis.3
B2. Find the optimal portfolio using Markowitz Modern Portfolio Theory adding at least one
of the two new financial assets.
B3. If given the entire $20 million, how should Thompson propose splitting in between the
Proindex and ProValue funds? Why?
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