SCMHRD: MBA, Batch of 2021-23

Securities Analysis & Portfolio Management (Sem III) – Group Assignment on

Portfolio Management
Instructions to students:

 MAXIMUM MARKS: 30 (part of the 100 mark internal assessment)

 Students are required to present a written solution to the case study given below.
 Students can work in groups not exceeding 5 members.
 Solution presented should include the following elements:
o Analysis of the situation/case background
o Solution suggested in respect of the case
o Analytical work showing how the group got to the solution along with clearly identified
assumptions.
o Contribution of each student of the group needs to be clearly identified against the relevant
work, failing which no marks will be allotted to the group.
 Use of charts and pictures is encouraged.
 Each group will be required to submit the word/powerpoint solution & associated excel files
(neatly formatted).
 A presentation/Q&A session can be called for following the submission. Please be ready.

Details of Assignment – Case study on portfolio management

The Himkush Institute of Technology is a premier university for technological studies, scientific
research and education with a sprawling campus near New Delhi. If offers a wide variety of
courses in engineering, cutting edge and next generation technology and opportunities for
research in areas of core sciences. Each year nearly 2,500 students are admitted to the various
courses with a total of 10,000 students /researchers on its campus in any given year.

The table below gives the information about the University’s financial state for the latest financial
year ended 31 Mar 2022.

Particulars Amount Rs. Particulars Amount Rs.

Endowment fund corpus 2,000 crores Avg. annual fee inflow 6,00,000
per student
Investment split Staff costs 350 crores per year
- Fixed deposits 750 crores Annual fee waiver 200 students per year
scholarships to
- Government bonds 350 crores Operating costs 200 crores per year
- Domestic Equity (via 250 crores Repairs, maintenance 75 crores per year
mutual funds) and IT infrastructure
costs
- US Equities (S&P 500 ETF) 100 crores Research grants paid 125 crores per year
- Bank balance & liquid funds 150 crores Revenue from projects 100 crores
done for government /
 corporates
- Building fund invested in 250 crores
AA rated corporate bonds
with 10-year maturity
- Scholarship fund invested 150 crores
in a hedge fund dealing
with high-yield debt
In the coming years, the University Management Board is confident of meeting the day to day
expenses and inflation related to these from the existing revenues, grants and other inflows.
However, it foresees the need for additional resources / inflows to meet its long-term goals.
Specifically,

 Funding the setting up of a research lab and pilot facilities to work alongside the industry on
next generation technologies in the field of robotics and autonomous piloting of aircraft. The
management estimates this will require an investment of Rs. 200 crores and an annual
expense of Rs. 50 crores. They expect 50% of the annual expenses to be covered by the
industrial partners, but will have to spend on setting up the facilities themselves.
 Expanding the fee waiver scholarship programme to 500 students per year, with the
incremental students largely being from the post-graduation courses. PG course fees are
typically 2x the average across the university.
 Renovating the campus building and upgrading the facilities & equipment. The management
expects an expenditure of Rs. 350 crores on this 5-years from now.
 Starting one new course per year for the next 5-years. Typically starting a new course entails
a cash outflow of Rs. 20 crores per year (net of fees, etc) for the first three years.

The university’s finances are managed by the CFO and a Investment committee formed from the
Board of Trustees. The latter have to authorise any changes to the investments and large spends.
The current framework for investments and managing the finances calls for the following.

 Having ready access to at least 6-months’ worth of cash flow requirements at any given time to
avoid a liquidity crunch from unforeseen situations.
 Duration matching of investments from the corpus of funds which are set-up for fulfilling
specific goals.
 Exposure to one single instrument, entity, sector or country to not exceed 10% of the corpus.
The limit on international investments is 15% of the corpus. This needs to be hedged to the
extent possible.
 The endowment fund is allowed to invest in all types of instruments (PMS, MFs, AIFs, ETFs,
hedge funds, direct equities, etc) as the Investment Committee comprises veterans from the
world of investing including 3 CFA charter holders with >10-years’ experience in the
investment industry. The endowment fund is characterised as a quasi institutional investor
from a regulatory standpoint.
 However, the Investment committee lays particular importance to the investment/fund
managers following a robust process driven approach with specific emphasis on fundamental
investment approach, rather than technical analysis. They have a mandate to invest only in
investment vehicles / asset managers with a track record of strong and consistent performance
 for at least 5-years, though they can make specific exceptions if required provided the
investment exposure is <5% of the corpus. They are also open to factor based investing if it fits
within their philosophy.

You are required to:

a) Draw up an investment policy statement for the endowment fund. Your IPS should contain
the investor profile, the return requirements/objectives, a risk-assessment of the investor,
constraints, investment process that should be followed and procedures for construction
and review of the portfolio.
b) Review the existing investment allocation and suggest a suitable asset allocation for the
entire investment corpus of Rs. 2,000 crore in the context of the IPS
c) Evaluate and suggest the investment instruments / vehicles to be used within the context
of the asset allocation framework suggested above. Your investment suggestions need to
be detailed (i.e. including the specific fund / instrument) and backed by thorough analysis
of the risk/reward, performance and suitability for the investor.
d) If you suggest managed and pooled investment products (i.e. MFs / hedge funds, etc), you
also need to present an analysis of the asset managers’ philosophy, track record, profile of
their personnel and their achievements.
e) Present the above analysis in the form of a master document/presentation which is to be
submitted to the Investment committee.

You are allowed to make suitable assumptions, but this should be backed by suitable analysis /
reasoning. Your document should be backed by workings presented in the form of annexures to
the main document / presentation.