UEH UNIVERSITY

COLLEGE OF BUSINESS

SCHOOL OF FINANCE


PORTFOLIO MANAGEMENT

INVESTMENT PORTFOLIO STATEMENT

Group members:
Lê Vũ Châu Khoa
Đinh Nguyễn Quỳnh Hương
Phạm Như Nguyệt
Châu Lê Hoài Nhã
Kha Nguyễn Trọng Đức
Phạm Nguyễn Kim Ngân
Class: 23D1FIN50505802
Table of Contents
I. Introduction ......................................................................................................................................... 1
II. Statement of Purpose ...................................................................................................................... 1
III. Duties and Responsibilities ............................................................................................................. 2
IV. Procedures to update the IPS and respond to various contingencies ......................................... 3
V. Investment Objectives......................................................................................................................... 4
VI. Constraints....................................................................................................................................... 5
VII. Investment Guidelines .................................................................................................................... 5
VIII. Performance Evaluation and Reporting ................................................................................... 6
IX. Appendices ....................................................................................................................................... 6
 I. Introduction
This Investment Policy Statement manages the personal investment portfolios of Ms. Khoa
Le.
By the time of 50 years old, the Client would like to enjoy the retirement with the following
criteria:
● Live a comfortable retirement without worrying about going back to work
● Gift money to family regularly to help get them started in life
● Support charities in their work to make systemic changes
● Take two trips a year and pay for family expenses
● Not worry about healthcare expenses or paying for long-term care

Summary:
Khoa Le, Individual Investor, age 20
Portfolio: Individual, Taxable
State: Ohio
Tax ID: xxx-xx-xxxx
Current Assets: 10,000 USD

II. Statement of Purpose

The purpose of this Investment Policy Statement (IPS) is to establish a clear document of the
investment objectives between the Advisor and the Client as investment manager. The
following issues are addressed in this IPS:
● Outline the client’s goals and provides the framework for a disciplined approach to
invest
● Establish duties, responsibilities, procedures, objectives, constraints, guidelines and
evaluations for the investment
● Assist in investing in well-diversified assets to generate long-term returns to support
for retirement of the client
● Encourage effective communication between Client and Advisor

1
 ● Establish the agreement for monitoring performance of the investments.
This IPS is meant to serve as both a decision-making tool and a discipline framework.
Furthermore, it is intended to be specific even as providing the flexibility enough to be
practical.

III. Duties and Responsibilities

1. The advisor
The advisor shall manage the portfolio in accordance with the guidelines of this IPS while
serving as a fiduciary to the client.
The advisor shall be responsible for:
● Assisting in finding and selecting a qualified custodian
● Continuously researching market
● Discussing all the required data with the client for the construction of IPS
● Offering the appropriate asset allocation and securities selection for the investment
portfolio
● Regularly evaluating each holding in your portfolio
● Monitoring portfolio performance, reporting the investment’s growth, diversifying and
rebalancing the portfolio
● Matching the information of monthly accounting, transaction, and asset summary to
custodian’s valuations, discussing and settling any remarkable disparities with the
custodian
● Preparing quarterly performance reports and annually overall portfolio results
● Recommending necessary adjustments if the investment goals are not met
● Having enough knowledge and experience to respond to contingencies

2. The custodian
A custodian is a nonaffiliated financial organization in charge of safekeeping your assets. By
holding your portfolio assets on your behalf as a distinct entity from your investment
management company, the custodian plays a crucial role in protecting your investment
portfolio against misappropriation and the effects of the investment advisor's insolvency.

2
A custodian shall be in charge of:
● Physically holding the securities
● Keeping track of the securities’ maturities
● Supervising purchase and sales transactions of assets
● Providing monthly and year-end accounting reports on all of the investment
transactions conducted by the investment advisors
● Compiling dividends and interests of the securities
● Disclosing all realized income and principal in periodic statements
● Providing pertinent information about tax matters, regarding tax exemptions and
refunds

3. The client
The client has responsibilities to confer with the advisor about the expected investment return,
acceptable level of risk, and related issues in the process of constructing IPS. He/She is also
required to have knowledge to select the satisfied combination of assets based on their
expected return, risk tolerance, and time horizon.

IV. Procedures to update the IPS and respond to various contingencies

Step 1: The advisor needs to monitor market conditions and conduct market research as
frequently as possible.
Step 2: The advisor needs to regularly compare market values to the goal allocation.
Step 3: The custodian needs to report information on the performance of the asset classes and
also the investment advisor on a monthly and quarterly basis.
Step 4: The advisor needs to prepare monthly or quarterly reports of the investment on their
own.
Step 5: At each monthly or quarterly meeting, all prepared documents about the overall
portfolio need to be presented to be discussed and fully assessed, and then necessary
adjustments shall be proposed. Any modification to our plan will be thought thoroughly before
being implemented.

3
In case of a contingency, all the involved participants of the IPS must immediately arrange an
appointment (may be online if the situation is really urgent) accessing all the gathered
information related to the urgency and also the current condition of the IPS. Essential
amendments shall be offered and subsequent portfolio direction shall be determined.

V. Investment Objectives
1. Investment Objectives
Considering the details mentioned in Ms. Khoa Le's client profile, such as her age, financial
situation, and future plans. These demonstrate that she requires long-term investment (phase:
Accumulation Phase) including: retirement and children’s college needs, and the IPS will be
developed with the following objectives:
● Long-term growth and capital appreciation.
● To remain adaptable in order to accommodate her future needs.
● To provide investment options that encompass a wide range of risk and return
characteristics while maximizing return within appropriate and prudent levels of risk.
● To keep administrative and investment costs under control.
● To give her the ability to manage their individual assets.
● To provide her with investment education.

2. Return Objectives and Risk Tolerance

● Affirmatively manage risk through deliberate exposures, use of leverage and
management of liquidity.
● Utilize market volatility to rebalance the portfolio, trimming assets that have
appreciated above the goal policy allocation and buying assets that have dropped below
the target policy allocation.
● Risk Tolerance (Please refer to Appendices pages for the set of questions used to assess
the risk preference of the client.)
Conservative
Semi-Conservative
⊠ Semi-Aggressive

4
 Aggressive

VI. Constraints
● Time horizon
Generally speaking, the portfolio can be more aggressive the longer the time span. The
portfolio will be invested for 30 years as the client wishes to retire by the age of 50 at
which time the client will draw money from the portfolio.
● Liquidity
Since the client’s aim is to generate long-term cumulative retirement savings, there is
no short to medium cash needs.
● Tax status
The client is subject to personal income taxes.
● Legal and Regulatory Factors
The portfolio management must comply with the Vietnam Law on Investment &
Securities.
● Unique Circumstances
No investment in alcohol production, gambling, poor environment practices & human
right abuses.

VII. Investment Guidelines

1. Overview
Investors who, through a properly thought-out, strategic, and disciplined investment approach,
aim to create high risk-adjusted returns and invest for the long term in line with the enduring
nature of their assets. We aim to optimize return for a specific amount of risk that is consistent
with the Client's risk tolerance, in line with Modern Portfolio Theory.

2. Strategic asset allocation

For possible inclusion in an asset allocation system, a wide range of asset classes are taken
into account. Determining an asset mix that delivers a balanced risk/return tradeoff is the goal.
This is done by examining how the asset mix will affect the obligation or spending policy over

5
a range of time horizons. Investments will be diversified to lessen the volatility brought on by
concentrated portfolios and to lessen the likelihood that specific investment managers within
the portfolio would suffer significant losses.
3. Investment Selection Criteria
Equities are chosen by comparing them to their respective peer groups, and the stocks that rank
in the top quartile across the majority of the following criteria are then submitted for
assessment by the PFA Investment Committee:
• Return on Equity (ROE) or Return on Assets (ROA)
• Earnings Yield (Earnings Per Share divided by Share Price)
• Free Cash Flow (FCF) divided by Enterprise Value or Market Value
• Current Ratio (Current Assets divided by Current Liabilities)
• Debt Ratio (Liabilities divided by Assets)

Once companies are included in the portfolio, the PFA Investment Committee may decide to
remove them if their qualities have worsened enough to no longer meet the initial criteria for
admission.

VIII. Performance Evaluation and Reporting

Quarterly reports and continuous consultations with advisors are available for the purpose of
evaluating the performance of a portfolio.
The portfolio returns will be compared with the benchmark portfolio of 60% S&P 500 index
and 40% Barclays Global Aggregate Bond Index.

IX. Appendices
1. Strategic Asset Allocation
By distributing a portfolio's assets in accordance with a person's objectives, risk tolerance, and
estimated investment horizon, asset allocation seeks to strike a balance between return and
risk.

6
The portfolio is allowed to allocate assets in a diversified way without having to focus on a
single asset and must flexibly respond to different market environments. An asset allocation
policy requires that there be a long-term goal as well as the scope around that goal to be
consistent with the above rationale. The goals and scopes in effect from the time of adoption
are outlined below over time. Since goals and ranges are both long-term in nature, they won't
change too much. If changes occur, the Investment Committee is authorized to edit them which
are displayed from time to time.

Stocks are recommended to hold for 5 years or so, while the appropriate holding time for cash
and money markets is 1 year. From here, financial advisors have recommended subtracting the
investor's age from 100 to determine what percentage to invest in stocks. Based on the principle
of asset allocation by age, we realize that our client is only 20 years old with plenty of time to
be able to accept the risks and market fluctuations in her investments. Therefore, we decide to
allocate assets in the portfolio according to the table below:

Asset Classes Weights Ranges

Equities 60% 30% - 75%

Fixed Income 10% 0% - 40%
Absolute Return 10% 0% - 30%
Real Assets 10% 0% - 30%
Private Capital 10% 0% - 30%
Cash 0% 0% - 5%

2. Rebalancing Policy
Maintaining the risk and expected return of the portfolio within the limits specified in the
Investment Policy Statement is accomplished by rebalancing it with the Policy Strategic Target
allocation ranges for the individual asset classes. The following factors should be taken into
account when reallocating assets among asset classes and managers:
1) Mainly dedicated to upholding the long-term strategic allocation targets and/or

7
2) When the risk and projected reward potential is believed to be such that an asset class
weighting should be pushed toward the authorized policy maximum or minimum, the
investment manager will rebalance the portfolio with the asset allocation ranges mentioned
above.
The Portfolio will be rebalanced once a year, though the Advisor may choose to rebalance the
Portfolio more or less frequently.

3. Questions used to assess our client’s risk preference

● You win $300 in an office football pool. You: (a) spend it on groceries, (b) purchase
lottery tickets, (c) put it in a money market account, (d) buy some stock.
● Two weeks after buying 100 shares of a $20 stock, the price jumps to over $30. You
decide to: (a) buy more stock; it’s obviously a winner, (b) sell it and take your profits,
(c) sell half to recoup some costs and hold the rest, (d) sit tight and wait for it to advance
even more.
● On days when the stock market jumps way up, you: (a) wish you had invested more,
(b) call your financial advisor and ask for recommendations, (c) feel glad you’re not in
the market because it fluctuates too much, (d) pay little attention.
● You’re planning a vacation trip and can either lock in a fixed room-and-meals rate of
$150 per day or book standby and pay anywhere from $100 to $300 per day. You: (a)
take the fixed-rate deal, (b) talk to people who have been there about the availability of
last-minute accommodations, (c) book standby and also arrange vacation insurance
because you’re leery of the tour operator, (d) take your chances with standby.
● The owner of your apartment building is converting the units to condominiums. You
can buy your unit for $75,000 or an option on a unit for $15,000. (Units have recently
sold for close to $100,000, and prices seem to be going up.) For financing, you’ll have
to borrow the down payment and pay mortgage and condo fees higher than your present
rent. You: (a) buy your unit, (b) buy your unit and look for another to buy, (c) sell the
option and arrange to rent the unit yourself, (d) sell the option and move out because
you think the conversion will attract couples with small children.

8
● You have been working three years for a rapidly growing company. As an executive,
you are offered the option of buying up to 2% of company stock: 2,000 shares at $10 a
share. Although the company is privately owned (its stock does not trade on the open
market), its majority owner has made handsome profits selling three other businesses
and intends to sell this one eventually. You: (a) purchase all the shares you can and tell
the owner you would invest more if allowed, (b) purchase all the shares, (c) purchase
half the shares, (d) purchase a small amount of shares.
● You go to a casino for the first time. You choose to play: (a) quarter slot machines, (b)
$5 minimum bet roulette, (c) dollar slot machines, (d) $25 minimum-bet blackjack.
● You want to take someone out for a special dinner in a city that’s new to you. How do
you pick a place? (a) read restaurant reviews in the local newspaper, (b) ask coworkers
if they know of a suitable place, (c) call the only other person you know in this city,
who eats out a lot but only recently moved there, (d) visit the city sometime before your
dinner to check out the restaurants yourself.
● The expression that best describes your lifestyle is: (a) no guts, no glory, (b) just do it!
(c) look before you leap, (d) all good things come to those who wait.
● Your attitude toward money is best described as: (a) a dollar saved is a dollar earned,
(b) you’ve got to spend money to make money, (c) cash and carry only, (d) whenever
possible, use other people’s money.
Credit: Investment Analysis and Portfolio Management - Reilly, Brown 10th, Exhibit 2.4
Our client scored 32/40, this makes her risk preference semi-aggressive. Based on this
result, the IPS was constructed to maximize her portfolio’s return.