This charity was set up by a very wealthy Victorian industrialist in 1896 who made a
fortune from lace-making and hosiery in the East Midlands area. It is dedicated to
giving charitable financial support to widows and orphans living within a specific
geographical area located around the City of Nottingham. It is run by a group of elected
trustees and has investments and cash approaching £4.5million.
The Trustees donate the Charity’s income to deserving cases who are invited to apply
following referral by social services and charitable organisations. These applications are
then assessed by a panel, and in qualifying cases, financial assistance is offered to help
with living costs, particularly in relation to education.
The Charity has approached you, as an independent financial advisor, to see if
you can advise and assist them going forward.
Specifically and in confidence, the Trustees have asked for their investment portfolio to
be reviewed and redesigned as they have concerns about its present structure. They
feel that it should be more balanced; less exposed to investment risks and are seeking
your advice in this respect.
In addition to the securities shown in the table, the Charity owned, until recently, a small
portfolio of commercial retail units. These have now been sold and the proceeds
(£960,000) are being held in a bank money market account, on one month’s notice of
withdrawal. This cash balance is also available for new investment.
As there is an adequate cash balance in the Charity’s current account to cover everyday
expenditure, you are reliably informed that there is no requirement for the Trustees to
retain any further money in cash as an “emergency reserve”.
The chairman of the Trustees has also mentioned that, following the appointment
of some new members, there has been some heated debate about the progress of
the funds under their control. He says that the following views have been
expressed at a recent meeting:
“The current investment prices and values are out of date by at least six months. Also
they look very unbalanced. Look at all those damned bank shares. We’ve lost a fortune
thanks to those bankers”.
“Financial advisors are just a bunch of rogues and charlatans and are only in it for the
commission they make by churning investments around. The one thing that they cannot
control is risk and, as a charity, security is clearly important to us.”
“The stock market is just a casino and is no place for a well respected charity such as
ours. You might as well stick all the money on the National Lottery”.
“Our share investments seem to be concentrated in similar companies and not very well
spread about. A friend of mine, who does a bit of investing in the stock market, tells me
this can potentially be very dangerous, and quite risky, if anything goes wrong.”
Details of the Charity’s investments are shown in the following table. The Chairman of
the Trustees apologises for the fact that the prices are a little out of date, they were last
valued about six months ago. So the first request, from the Chairman is for you to
calculate exactly what the total value of the investments is at the time of your
review. The Trustee’s chairman has also expressed the following concerns to
- the possible exposure to risk that is inherent in such a relatively large portfolio of
investments spread across various asset classes.
- the relatively high management fees which are payable for the Investment Trust
shares. They are not happy about this. Some of the new trustees have even proposed
that they should become more active in investment decisions themselves and not be
reliant on professional advice with all the associated costs.
- a more transparent investment policy whereby it is clear exactly what shares are in the
portfolio. The Investment Trusts appear to be very shadowy enterprises and the charity
has over £1.2m invested in them.
- to ensure their investments can be justified from an ethical point of view. The
chairman has indicated to you that this is a very important consideration from the
perspective of the Charity.
- to address their fears about the level of inflation in the future and how they could
mitigate any possible rises in the level of inflation. They have fears that both interest
rates and inflation may rise during 2019.
The chairman and the treasurer of the Trustees have requested that you review
the existing portfolio by updating the valuations and commenting on the range of
investments held, initially, in terms of asset allocation and risk. And then to
recommend, with reasons:
- how you would respond to the concerns of the Chairman, given above, and the views
of the five new Trustee members.
- the changes you would make to their current portfolio in terms of asset allocation and
diversification with your reasons in terms of investment theory and risk management.
- the construction of a new balanced investment portfolio for the Charity including your
recommendations for the investment of the additional £960,000 currently held in cash.
Therefore; in summary, you are to write a 3,000 word report which:
1) Updates the investment totals and reviews the suitability of the present
investment portfolio, with an analysis of the main risks.
2) Discuss briefly the theory behind portfolio planning and risk management.
You should also make reference to the relevance of the Trustee Act and the
responsibilities of Trustees in this type of situation. *See note below.
3) Make recommendations for appropriate changes to create a new
investment portfolio by applying relevant risk and return measures and
showing how they have been used to evaluate the assets.
The new portfolio should meet the needs of the Charity and should include
the investment of the additional cash holding. In creating the new portfolio
you should address the concerns expressed by the Trustees.
As I would see it tennis has dependably been delegated a rich keeps an eye on game. This may be because of the way that when tennis began it was played by the Kings, Queens and honorability. This shame has now moved be that as it may, there are as yet certain socio-socioeconomics who modest far from the game. As per the Lawn Tennis Association, 2.9 million individuals matured four years and upwards played tennis in the UK in 2003. Further, this is strengthened by the British Embassy who recommends that around five million individuals play tennis in the UK. In any case, this is a substantial number yet there does not rival the quantity of individuals that play football. Of the 2.9 million tennis players the Lawn Tennis Association evaluates that 441,000 of these individuals play tennis in London; 137,000 of them playing normally. In the UK a significant number of the tennis battles and associations intend to draw in the more youthful age to take up tennis. This it is nothing unexpected that the more youthful age in the UK are probably going to play more tennis later on than that of the current more established age. Rather than the quantity of tennis players in the UK, American Tennis Life Magazine, which directed a study on tennis, delineates that 23.5 million Americans play tennis every year. Of this, 52 percent of players were men and 48 percent were ladies with the normal age of these players being 29. Further, the level of ladies players to men is reflected in the proportion of spectatorship. McNamee, (2001) represents that 48 percent of ladies watch tennis contrasted with 52 percent of men. I am astounded that ladies overall play less and observe less tennis. The previously mentioned represents that tennis is without a doubt a flourishing game inside the UK however all the while show that there is extension for development inside these figures. In this way, it is essential to build up the kind of individuals who don't play tennis and the explanations behind their absence of cooperation in the game. The sort of individuals not playing tennis are the individuals who are in the lower social classes who can't bear to pay for a club enrollment, those in territories where offices are in a condition of deterioration and those from ethnic minorities, the last will be talked about further. In addition, Sport England and the Lawn Tennis Association have recognized the accompanying obstructions to more prominent cooperation in tennis in London, some of which incorporate; cost (anyway in all actuality this is progressively down to people groups view of the game – examines demonstrate that the genuine expense of tennis membershi>GET ANSWER