Investment Advice(FPC008) Assignment 2 Assignment marks: 100 | Weight: 35% Student No:[Enter your Student No] I have read the Assignment Guide in the ‘General assessment information’ and have applied the word count principles to my work. My word count for this assignment is:[Enter your word count] words Your assignment should be loaded into KapLearn by 11.30 pm on the due date.All times are based on AEDT/AEST time zones. Refer to ‘Time remaining’ on the ‘Assignment’ page in KapLearn to ensure you submit your assignment by the specified due date and time. Checklist ü I have completed my assignment using Word. ü I have completed my assignment using Calibri, Arial, Times New Roman or Verdana fonts. ü I have added my Student No. on this page. ü I have added my word count on this page. ü I have added my Student No. in front of the filename in the footer on the second page. ü I have saved the file to be uploaded as StudentNo_FPC008_AS2_v7A2 ü Each question of my assignment is within the word limit guidelines for that question as per the ‘General assessment information’ (Assessment à Assignment à General assessment information). ü My assignment file size is no larger than 2 MB. ü If tables were required, they are visible as text, not as links or images. ü I have not removed the marking grid from the footer. ü I have submitted my assignment as per the instructions in KapLearn. Marker feedback Comment on overall performance: For marker use only. Instructions to students • This assignment covers Topics 3 to 7 and accounts for 35% of your final grade. • There are seven (7) short-answer questions in this assignment. You should answer all questions. • The overall word limit for the assignment is 4,000 words. Marks will only be awarded for answers up to the word limit (plus 10%) for each question. Any material written after this will not be counted towards your mark for that question. Headings, quotes and references within the body of the answer are included in the word count. Numerical tables, calculations, and reference lists are not included. For more information on word counts and their rationale, go to Assessment à Assignment à General assessment information. • Refer to the Criteria-based Marking Guide for guidelines on what is expected for each question. • The ‘General assessment information’ section in KapLearn contains information about format and presentation, word limits, citations and referencing, collusion, plagiarism and other policies, useful resources, submitting your assignment and accessing your results. • Answers are to be in your own words. Reference and cite all your sources (within the text of your answer) when quoting or using material from external sources. Include a reference list at the end of your assignment. Refer to the ‘Referencing and Citations Guide’ available from the ‘Build Your Skills’ in KapLearn for further information on referencing. • Indicative weightings are noted beside each question. Use these weightings to assist you with your allocation of time and resources. The weightings indicate the relative importance of each question. • State all assumptions used in providing your answer. • Requests for special consideration or information pertaining to special consideration written in the body of the assignment will not be considered by the marker. Refer to the ‘special consideration’ section of the Assessment Policy on Kaplan’s website for more information. Learning outcomes (LO) mappingMarks1. Evaluate investment advice processes and frameworks in the delivery of quality investment advice to retail investors.172. Analyse Efficient Market Hypothesis (EMH) with respect to the empirical evidence for it and its usefulness and applications for the provision of investment advice.103. Critically analyse a client’s investment objectives and constraints.184. Apply knowledge of asset classes, investment markets and tax in providing expert investment advice.115. Critically analyse the different investment structures and fund managers available to retail investors.136. Conduct appropriate quantitative and qualitative research in recommending suitable investment strategies and products.31Total marks100 Criteria-based Marking Guide The Criteria-based Marking Guide provided below is designed to assist students to understand what is expected of them in each question and to let them know how their performance will be judged. It provides advice about the criteria used in the marking of the question and the maximum marks awarded for each criteria. Assignment presentation and referencing (5 marks) You are required to research beyond the subject notes in answering the questions in this assignment. Reference and cite all your sources when quoting or using material from external sources. Include a reference list at the end of your assignment. You are required to: • use an appropriate presentation and format for your assignment including but not limited to consistent formatting layout, appropriate use of tables, charts, headings and bullet points • demonstrate independent research and analysis • demonstrate appropriate use of relevant references • follow the Harvard referencing style as recommended in the Referencing and Citations Guide available from the ‘Library Learning Hub’ in KapLearn • include a reference list at the end of your assignment following the recommended referencing style • adhere to the assignment word limit. Criteria-based Marking Guide for presentation and referencing The Criteria-based Marking Guide provided below is designed to assist students to understand what is expected of them in each question and to let them know how their performance will be judged. It provides advice about the criteria used in the marking of the question and what discriminates between an excellent, satisfactory and unsatisfactory answer. Excellent (Mark range: 4–5 marks)Satisfactory (Mark range: 2.5–3.5 marks)Unsatisfactory (Mark range: 0–2.0 marks)• clear and well set out assignment layout and structure • adheres to assignment and question word limits • clear evidence of independent research and analysis incorporated throughout assignment • appropriate use of referencing using the Harvard referencing style • comprehensive reference list provided at end of assignment• adequate assignment layout and structure • adheres to assignment and question word limits • some evidence of independent research and analysis • some use of referencing using the Harvard referencing style • reference list provided at end of assignment• poor assignment layout and/or structure • assignment is significantly under or over the word limit • no demonstrated independent research or analysis • no use of references or Harvard referencing style not used • no or inadequate reference list provided at end of assignment Mark allocation guide for markers: Research and referencing Markers are to consider the whole of the student’s assignment and use their discretion when awarding marks for assignment presentation and referencing. Award up to 5 marks based on the Criteria‑based Marking Guide above. Examples of the Harvard style for in-text and reference list citations are shown on the Referencing and Citations Guide available from the ‘Library Learning Hub’ in KapLearn. 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. Criteria-based Marking Guide for Question 1: Efficient market hypothesis Excellent (Mark range: 7.5–10 marks)Satisfactory (Mark range: 5–7 marks)Unsatisfactory (Mark range: 0–4.5 marks)• A clear and comprehensive overview of the EMH and clear explanation on how it relates to the client situation. • A clear and comprehensive discussion on how the views of the authors from the articles impact the client portfolio in relation to the current funds in the portfolio and the asset allocation weightings in the ABC Super portfolio. • A clear and comprehensive discussion showing clear links between the article’s conclusions and portfolio construction.• A brief overview of the EMH and some detail on how it relates to the client situation. • Some discussion on how the views of the authors from the articles impact the client portfolio in relation to the current funds in the portfolio and the asset allocation weightings in the ABC Super portfolio. • Some discussion showing some link between the article’s conclusions and portfolio construction.• Little or no discussion of the EMH and some detail on how it relates to the client situation. • Little or no discussion on how the views of the authors from the articles impact the client portfolio in relation to the current funds in the portfolio and the asset allocation weightings in the ABC Super portfolio. • Poor discussion, which is unclear with little to no link between the article’s conclusions and portfolio construction. Insert your answers to Question 1 below this line EMH uses all information available that is reflected in the share price in a timely manner. To beat the market consistently would therefore be very difficult, therefore the most consistent result overtime would appear to be EMH. I am a believer in this theory. There is always market outperformance, but I would consider this more of an outlier. This theory has lead to an influx of managed funds that are index based funds for ASX 200 and S and P 500. As Tex is relatively young at 32 and is not in need of funds at least in the next 5 years there is greatly opportunity to invest in indexed funds to diversify his portfolio then just the 1.5% return on his current investment and maintain a liquidity. Any recommendations would need to note his current risk profile with ranges. Current Super profile has a mixture of index funds and property and Australian share funds. EMH can be further used to potentially diversify portfolio or “not put all eggs in one basket”.In the article How can the market be efficient if investors are not rational by John Livanas utility and prospect theory is discussed. Fama’s definition of EMH is that it uses all market information available and market understands the implications. Fama defines 3 forms of EMH weak form eg market considers all historical information, semi strong form eg market considers announcements, earnings and share splits. Strong form eg private or insider trading not ideal as it is illegal to use this information for investment decisions. You can go to jail for insider trading eg like high profile case Oliver Curtis which was for $1,430,000 approx. Another article considered was Market efficiency and the GFC by Steve Easton and Paul Kerin in this article Fama which go through some of Fama’s theories such as such as market has priced in all available. Part of this article look at the recent global shock being the GFC but a definitive conclusion was not made. Article looks at micro and macro efficiencies. End of answers to Question 1 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) Criteria-based Marking Guide for Question 2: Asset allocation ExcellentSatisfactoryUnsatisfactory(a)• Clear discussion of the advantages of fixed interest and its role in the overall portfolio. • Strong justification and analysis provided for the inclusion of one domestic and one international fund into the ABC portfolio. • Clear discussion showing excellent understanding of why fixed interest indexes are problematic and why international fixed interest needs to be currency hedged.• Some discussion on some of the advantages of fixed interest and its role in the overall portfolio. • Some justification and analysis provided for the inclusion of one domestic and one international fund into the ABC portfolio. • Some discussion showing satisfactory understanding of why fixed interest indexes are problematic and why international fixed interest needs to be currency hedged.• Only lists points (no discussion) on few or none of the advantages of fixed interest and its role in the overall portfolio. • Poor or no justification and analysis provided for the inclusion of one domestic and one international fund into the ABC portfolio. • Poor discussion showing only a little to no understanding of why fixed interest indexes are problematic and why international fixed interest needs to be currency hedged.(Range: 0–8 marks)(Range: 6–8 marks)(Range: 4–5.5 marks)(Range: 0–3.5 marks)(b)• Clear discussion showing a thorough understanding of the role of alternative investments in a portfolio taking into account risk and diversification. • Strong justification and analysis provided for the inclusion or exclusion of the Partners Fund into the ABC portfolio. • Strong identification of three issues in relation to the property component of the portfolio and appropriate solutions provided.• Some discussion showing a satisfactory understanding of the role of alternative investments in a portfolio taking into account risk and diversification. • Some justification and analysis provided for the inclusion or exclusion of the Partners Fund into the ABC portfolio. • Some identification of three issues in relation to the property component of the portfolio and appropriate solutions provided.• Poor discussion showing little to no understanding of the role of alternative investments in a portfolio taking into account risk and diversification. • Little or no justification and analysis provided for the inclusion or exclusion of the Partners Fund into the ABC portfolio. • Little or no identification of three issues in relation to the property component of the portfolio and appropriate solutions provided.(Range: 0–9 marks)(Range: 7.5–9 marks)(Range: 4.5–7 marks)(Range: 0–4 marks) Insert your answers to Question 2(a)–(b) below this line A(i) By including fixed income it will allow an income stream to help with Tex’s living expenses and other costs. It is capital stable and will diversify his portfolio by smoothing out any volatility. Income is usually guaranteed at the start of period so offers certainty. It allows easy access to funds and is low risk in nature relative to other asset types. Low volatility than other assets except cash. In the event of bankruptcy generally higher priority to claim an asset. ii) End of answers to Question 2(a)–(b) 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) Criteria-based Marking Guide for Question 3: Platforms and products ExcellentSatisfactoryUnsatisfactory(a)• Clear discussion showing a thorough understanding of the benefits and disadvantages of using a fund manager compared to direct investments. • Well set out and formatted table(s) showing the ICR and performance of the funds in the APL. Strong reasoning in relation to the analysis of the tables.• Some discussion showing a satisfactory understanding of the benefits and disadvantages of using a fund manager compared to direct investments. • A table showing the ICR and performance of the funds in the APL. Some reasoning in relation to the analysis of the tables.• Poor discussion showing little to no understanding of the benefits and disadvantages of using a fund manager compared to direct investments. • No table showing the ICR and performance of the funds in the APL. Poor or no reasoning in relation to the analysis of the tables.(Range: 0–6 marks)(Range: 4.5–6 marks)(Range: 3–4 marks)(Range: 0–2.5 marks)(b)• Thorough understanding of the advantages and disadvantages of gearing. • Excellent discussion of margin call strategies and clear reasoning of the application of these to Lachlan’s situation.• Reasonable understanding of the advantages and disadvantages of gearing. • Fair discussion of margin call strategies and their application to Lachlan’s situation.• Poor understanding of the advantages and disadvantages of gearing. • Poor discussion of margin call strategies and incorrect application of these to Lachlan’s situation.(Range: 0–4 marks)(Range: 3.5–4 marks)(Range: 1.5–3 marks)(Range: 0–1 mark) Insert your answers to Question 3(a)–(b) below this line End of answers to Question 3(a)–(b) 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) Criteria-based Marking Guide for Question 4: Tactical asset allocation ExcellentSatisfactoryUnsatisfactory(a)• Clear discussion showing thorough understanding of the key differences between a buy/hold approach and periodic rebalancing. • Clear discussion and arguments on whether or not the strategy has worked.• Some discussion showing a satisfactory understanding of the key differences between a buy/hold approach and periodic rebalancing. • Some discussion and arguments on whether or not the strategy has worked.• Little to no discussion showing a poor understanding of the key differences between a buy/hold approach and periodic rebalancing. • Little or no discussion and arguments on whether or not the strategy has worked.(Range: 4 marks)(Range: 3–4 marks)(Range: 2–2.5 marks)(Range: 0–1.5 marks)(b)• Clear description of TAA leading to coherent discussion of the issues to be considered when adopting TAA as opposed to SAA, showing a thorough understanding of the relevant issues. • Clear identification of the issues with the current weightings and the SAA.• Some discussion of the issues to be considered when adopting TAA as opposed to SAA, showing a satisfactory understanding of the relevant issues. • Some identification of the issues with the current weightings and the SAA.• Little to no discussion of issues to be considered when adopting TAA as opposed to SAA, showing a poor understanding of the relevant issues. • Little and/or incorrect identification of the issues with the current weightings and the SAA.(Range: 3 marks)(Range: 2.5–3.0 marks)(Range: 1.5–2.0 marks)(Range: 0–1 mark)(c)• Clear discussions showing a thorough knowledge of the impact of an environment of falling domestic interest rates and a steady US interest rate on each asset class, as well as how rising rates cause a change in relevant asset class valuation, and how long-term asset allocation should be adjusted as a result of this. • Clear and considered discussion on how the TAA weightings for each asset class should be adjusted.• Some discussion on the impact of an environment of falling domestic interest rates and a steady US interest rate on most of the relevant asset classes with some discussion on how rising rates cause a change in relevant asset class valuation, and how long-term asset allocation should be adjusted as a result of this. • Some discussion on how the TAA weightings for each asset class should be adjusted.• Little to no discussion on the impact of an environment falling domestic interest rates and a steady US interest rate. Little to no discussion on how rising rates cause a change in the relevant asset class valuation and how long-term asset allocation should be adjusted as a result of this. • Little or no discussion on how the TAA weightings for each asset class should be adjusted.(Range: 4 marks)(Range: 3.5–4 marks)(Range: 2–3 marks)(Range: 0–1.5 marks) Insert your answers to Question 4(a)–(c) below this line End of answers to Question 4(a)–(c) 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. Criteria-based Marking Guide for Question 5: Passive versus active funds Excellent (Mark range: 7.5–10 marks)Satisfactory (Mark range: 5–7 marks)Unsatisfactory (Mark range: 0–4.5 marks)• Clear discussion covering all relevant attributes of passive management. • Provide sound arguments in favour of active management. • Clear examples and evidence of thorough analysis of the funds currently in the portfolio and on the APL.• Some discussion covering most attributes of passive management. • Provide fair arguments in favour of active management. • Some examples and evidence of some analysis of the funds currently in the portfolio and on the APL.• Little to no discussion covering only some attributes of passive management. • Provide no arguments in favour of active management. • Little or no examples and evidence of analysis of the funds currently in the portfolio and on the APL. Insert your answers to Question 5 below this line End of answers to Question 5 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) Criteria-based Marking Guide for Question 6: Core-satellite versus blended approach ExcellentSatisfactoryUnsatisfactory(a)• Clear discussion and understanding of the core‑satellite and blended approaches to portfolio construction. • Clear and well justified analysis of the current portfolio and whether the strategy is core/satellite or blended. • Clear discussion and reasoning detailing which asset classes are suited to a blended style and which asset classes are suited to a core/satellite strategy.• Some discussion and understanding of the core‑satellite and blended approaches to portfolio construction. • Some sound analysis of the current portfolio and whether the strategy is core/satellite or blended. • Some brief discussion and reasoning detailing which asset classes are suited to a blended style and which asset classes are suited to a core/satellite strategy.• Little or no discussion and understanding of the core‑satellite and blended approaches to portfolio construction. • Little or no analysis of the current portfolio and whether the strategy is core/satellite or blended. • Minimal or no discussion and reasoning detailing which asset classes are suited to a blended style and which asset classes are suited to a core/satellite strategy.(Range: 0–7 marks)(Range: 5.5–7 marks)(Range: 3.5–5 marks)(Range: 0–3 marks)(b)Clear overview of the key investment process and philosophy of the fund. • Clear discussion and justification on the expected performance of the style of fund over the next 12 months.• Some review of the key investment process and philosophy of the fund. • Some basic discussion and some justification on the expected performance of the style of fund over the next 12 months.Little or no review of the key investment process and philosophy of the fund. • Little or no discussion and some justification on the expected performance of the style of fund over the next 12 months.(Range: 0–4 marks)(Range: 3.5–4 marks)(Range: 2–3 marks)(Range: 0–1.5 marks)(c)• Clear discussions of the key characteristics of a socially responsible fund. • Clear and well-reasoned justification of the fund being recommended.• Some discussion of the key characteristics of a socially responsible fund. • Some reasoning and justification of the fund being recommended.• Little or no discussion of the key characteristics of a socially responsible fund. • Clear and well-reasoned justification of the fund being recommended.(Range: 0–6 marks)(Range: 4.5–6 marks)(Range: 2.5–4.0 marks)(Range: 0–2 marks)(d)• Clear discussions defining style drift and how it can be detected and monitored, and why it is a problem. • Response shows thorough understanding of style drift issues and asset classes it is most common in. • Clear and well-reasoned justification of the fund being recommended.• Some discussions defining style drift with some mention of how it can be detected and monitored, and why it is a problem. • Response shows some understanding of style drift issues. • Some reasoning and justification of the fund being recommended.• Little to no discussion on style drift, how it can be detected and monitored, and why it is a problem. • Response shows a poor understanding of the issue. • Little or no reasoning or justification of the fund being recommended.(Range: 0–6 marks)(Range: 4.5–6 marks)(Range: 3–4 marks)(Range: 0–2.5 marks) Insert your answers to Question 6(a)–(d) below this line End of answers to Question 6(a)–(d) Question 7 Hiring and firing (14 marks | Word limit: 600 words) LO1: Evaluate investment advice processes and frameworks in the delivery of quality investment advice to retail investors. LO6: Conduct appropriate quantitative and qualitative research in recommending suitable investment strategies and products. Tex has asked about the process used when replacing a fund manager. He is interested in the issues that need to be considered in the process, as he has been reading the articles listed below. (a) Using these articles, discuss the considerations and problems in replacing a manager and the costs associated with hiring and firing fund managers. (10 marks) (b) Which managers would you review in the current portfolio? List some of the questions that you would ask the managers and considerations that you need to take into account. (4 marks) Articles • Charles, DE 2012, ‘Murder on the Orient Express: the mystery of underperformance’, Financial Analysts Journal, vol. 68, no. 4, viewed 13 July 2019, . • Rimkus, R 2013 ‘Choosing investment managers: a guide for institutional investors’,Enterprising Investor blog, CFA Institute, 11 September, viewed 13 July 2019, . • Stewart, SD 2013, ‘Manager selection’, CFA Institute Research Foundation, 4 December, pp. 1–35,viewed 13 July 2019, . • West, J & Ko, A 2014, Hiring good managers is hard? Ha! Try keeping them, Research Affiliates, November, viewed 13 July 2019, . Criteria-based Marking Guide for Question 7: Hiring and firing ExcellentSatisfactoryUnsatisfactory(a)• Clear and logical discussion that provides a complete set of factors for consideration in the process of changing managers, and the costs associated with changing managers. • Discussion which draws on facts from all the articles and draws an appropriate conclusion. • Referencing of the articles using the Harvard referencing style.• Some discussion that provides a reasonable set of factors for consideration in the process of changing managers, and the costs associated with changing managers. • Discussion which draws facts from most of the articles and draws an appropriate conclusion. • Some referencing of the articles.• Little to no discussion around relevant consideration in the process of changing managers, and the costs associated with changing managers. • Discussion which only draws on facts from some of the articles. • Limited discussion and reasoning on which funds should be reviewed. • No referencing of the articles.(Range: 10 marks)(Range: 8.5–10 marks)(Range: 5.5–8 marks)(Range: 0–5 marks)(b)• Clear discussion and reasoning on which funds should be reviewed. • Appropriate and well thought out questions to be asked to the managers provided. • Clear and logical considerations identified in relation to the manager reviews.• Some discussion and reasoning on which funds should be reviewed. • Adequate questions to be asked to the managers provided. • Some reasonable considerations identified in relation to the manager reviews.• Limited discussion and reasoning on which funds should be reviewed. • Poor or no questions to be asked to the managers provided. • Little or no considerations identified in relation to the manager reviews.(Range: 4 marks)(Range: 3.5–4 marks)(Range: 2–3 marks)(Range: 0–1.5 marks) Answers to Question 7 Research and referencing Australian Financial Review. 2020. Insider Trader Oliver Curtis Walks Out Of NSW Jail After Serving Year Sentence. [online] Available at: [Accessed 6 December 2020]. End of answers to Question 7 end of assignment 2
