Investment Policy Statement

Portfolio Management

Submitted to:
Shakila Yasmin
Associate Professor
Institute of Business
Administration, University of
Dhaka

Submitted by:
Kazi Ajwad Ahmed (ZR-73)
BBA 24th
Institute of Business
Administration, University of
Dhaka

24 July 2019
Introduction
The purpose of the investment policy statement is to establish a clear understanding between
you, Ahnaf Ahmed, and the investment firm, XYZ wealth management, about the investment
goals and objectives and the management policies that apply to your investment portfolio. This
IPS will:

 Establish reasonable expectations, objectives and guidelines regarding the investment of

assets.
 Create the framework for a well-diversified portfolio with suitable risk and expected
return. Including:
 Defining the responsibilities of the advisor
 Defining the responsibilities of the investor

The IPS is not a legal contract. It is understood that there can be no guarantee about the
attainment of the goals or investment objectives outlined within.

Goals and Objectives

Primary or Strategic Goals

 Fund retirement starting at age of 60

 Fund higher education for children abroad.
 Provide emergency cash for emergencies

Investor Profile
The investor, Ahnaf Ahmed, has a net worth of 10,540,400 BDT of with assets spread over in
bank account and real estate. A significant portion of the existing assets is in liquid state and thus
therefore deteriorating in value.

He has four dependents – his wife, two children, and fluffers, the family dog.
Investor lifecycle

The investor is currently in the consolidation phase. Investors in this phase have high incomes
and have already got past major expenses in their lives, giving them the ability to save and
invest. However, as retirement is only a few years away, there is a focus on capital conservation.
Investments tend to favor fixed income securities more than equity.

Risk Tolerance and Risk Appetite.

The investor’s risk tolerance is quite high given a steady stream of fixed income, and existing
wealth base, and insurance for further protection. Despite the high-risk tolerance, the investor is
risk averse and would prefer conservative strategies, given the investor’s lifecycle and overall
personality.

Portfolio Requirements
Basic Requirements the investor requires from the portfolio are as follows:

Liquidity Needs

The portfolio needs to be liquid to an extent so that the investor can withdraw money at short
notice in case of medical emergencies or other emergencies not covered by the insurance.

Time Horizon

A portion of the investment fund, that is intended to provide sustenance to the investor after
retirement will be long term, while a separate portion, intended to provide funds for the
education of his children will be more short term.

Expected Return

The client expects an expected return rate of inflation rate + 7% to overcome the deteriorating
effect of inflation with a safe margin.
Broad Asset Allocation
Based on the requirements and considerations noted above, the broad asset allocation that are to
be followed are as follows:

Asset Class Sub-asset Class Allocation

Equity Large Cap 20%
Small Cap 5%
Debt Investment Grade 40%
Below Investment Grade 5%
Risk Free Sovereign Bonds 30%
Cash 0%

The proportion allocated to equity is 25% in total, with 20% allocated to more stable, less riskier
large cap stocks, and with 5% invested in small cap shares, which tend to be more risky. These
long term high return and high risk investments are done to fund the long term payments
required after investment.

45% of the portfolio will be invested in fixed income securities which will provide the investor
with routine payments of interest and will allow him to fund the short term planned expenditure
on his children’s education

30% is invested in Risk free Sovereign Bonds to help provide a stable income. 0% is invested in
cash.

Reporting Guidelines
Performance is to be reported on a monthly basis, done through email and phone calls.

Performance Appraisal
The performance of the portfolio is to be compared with trading mutual funds of a similar
composition.

Frequency of Rebalancing
The portfolio is to be rebalanced on a semiannual basis, starting from the 1st of July 2019.