Risk And Return In Financial Management PowerPoint Presentation Slides
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The document provides a comprehensive framework for analyzing risk and return in financial management, focusing on historical asset performance, investment strategies, and portfolio monitoring. It includes detailed assessments of various asset types such as stocks, bonds, and T-bills, along with methodologies for measuring portfolio risk, return, and volatility. Additionally, it offers strategies for ranking passive income streams and insights on the impact of risk factors on financial performance.
Risk And Return In Financial Management PowerPoint Presentation Slides
- 1. Risk and Return in Financial Management Your Company Name
- 2. Content 1. Analyze historical company’s asset • Risk & return of company's assets YOY • Risk & return analysis over a time period • Risk & return of stocks, bonds & T-bills 2. Investment strategies of predefined portfolios 3. Risk and return measurement • Risk and return of portfolio managers ( Graphical form) • Risk and return of portfolio managers ( Tabular form) • Risk & return W.R.T proportionate investment in stocks & bonds 4. Portfolio monitoring and rebalancing • Measuring stocks volatility (risk) • Portfolio return analysis • Calculating asset beta • Portfolio value at risk 5. Ranking the passive income streams 6. Impact of risk 2
- 3. Risk & Return of Company’s Assets YoY Capture the return of each individual asset with an offsetting investment. Portfolio Variance Portfolio Invest (Weight) 15% 20% 12% 36% 17% Year Stock A Stock B Stock C Stock D Stock E 1 22.46% 12.55% 20.35% 8.75% 16.65% 2 -6.55% -2.49% 4.95% 4.18% 2.21% 3 6.02% 0.06% 1.72% 9.98% 1.35% 4 -5.78% -3.51% 10.72% -1.75% 2.95% 5 -0.18% -6.25% 1.95% 2.17% -3.50% 6 -3.35% -1.05% -3.95% -5.08% -9.45% 7 -9.15% -10.81% -8.48% -0.35% 7.85% 8 -5.35% -10.45% -18.65% 19.68% -11.37% 9 10.74% 15.62% 15.26% 13.15% 15.58% Average 1.56% -0.55% 3.85% 1.25% 2.06% St. Dev 11.75% 9.56% 14.25% 9.45% 9.09% Annual Return 21.15% -9.53% 65.45% 15.68% 25.11% 3
- 4. Risk & Return Analysis Over a Time Period Time Period 1Year 3 Years 5 Years 7 Years 10 Years 12 Years 15 Years Yearly Rolling Return Observations 38 36 34 32 29 27 24 Negative Return Observation 12 6 4 3 1 0 0 Loss Probability(%) 32 17 12 9 3 Nil Nil Median Return(%) 14 13 14 17 18 15 14 Average Return(%) 23 18 17 17 16 17 15 Max Return(%) 252 80 52 43 34 34 27 Minimum Return(%) -45 -15 -5 -2 -2 3 7 Standard Deviation(%) 50 20 14 11 8 7 5 This is a tabular representation of the financial assets over certain time period. You can alter the table as per need. 4
- 5. Risk & Return of Stocks, Bonds & T-Bills Portfolio 1 Portfolio 2 Portfolio3 Stocks 50% Stocks 45% Stocks 40% Bonds 40% Bonds 35% Bonds 30% T-Bills 10% T-Bills 10% T-Bills 10% Text Here Text Here Text Here Text Here Text Here Text Here Text Here Text Here Text Here Text Here Text Here Text Here Text Here Text Here Text Here Text Here Text Here Text Here Return 10.7% Return 11.1% Return 11.5% Volatility 10.9% Volatility 10.6% Volatility 10.5% The below comparison demonstrates the alternate portfolio that outperforms the traditional portfolio.You can modify the table as per need. 5
- 6. Investment Strategies of Predefined Portfolios Below is the graph which can be use to list down all the investment strategies based on the type of portfolios. Interest Bond Balanced Large Cap Value Index Equity Large Cap Blend Large Cap Growth Mid Cap Value Mid Cap Growth International Value Equity International Growth Equity Small – Cap Equity -Core Conservative Portfolio Moderate Portfolio Aggressive Portfolio RETURN RISK PREDEFINDED PORTFOLIOS INVESTMENT STRATEGIES 6
- 7. Risk And Return of Portfolio Managers (Graphical Form) 1/2 -45% -43% -41% -39% -37% -34% -28% -30% -23% -16% -14% 60.2% 55.7% 52.4% 48.8% 45.3% 41.8% 38.7% 34.6% 30.6% 29.6% 25.4% 10% 90% 100% 0% 25% 75% 35% 65% 50% 50% 55% 45% 60% 40% 70% 30% 100% 0% 40% 60% Your asset allocation Highest annual gain Worst annual loss 90%20% Stocks Bonds The slide measure the annual return for company’s assets with the percentage composition of allocation. 7
- 8. Risk and Return of Portfolio Managers (Graphical Form) 2/2 32 41 29 31 25 28 32 41 29 31 25 28 -11 -13 1 -5 -9 -21 2014 2015 2016 2017 2018 2019 Range 28% Index Return Underperforming Stock Relative Return Outperforming Stock Relative Return Size of Return Differential Analyse the return value of portfolios on the level of index return. 8
- 9. Risk and Return of Portfolio Managers (Tabular Form) Diversifiable Risk Asset Allocation 1-Jan-2018 31- Dec-2018 ReturnAmount Invested($) Shares Stock Price($) Shares Stock Price($) Earnings/Losses($) US Stock 1 60% 15,000 600 20 600 15 9,000 -40% US Stock 2 15,000 600 22 600 18 10,800 -28% US Stock 3 15,000 600 28 600 29 17,400 -16% US Stock 4 15,000 600 30 600 22 13,200 -12% Developed 25% 4,000 300 8 300 15 4,500 13% Developed 4,000 300 8 300 11 3,300 -18% Developed 3,000 250 9 250 13 3,250 8% Developed 3,000 250 9 250 17 4,250 42% Developed 2,500 250 9 250 11 2,750 10% Developed 3,000 250 9 250 19 4,625 54% Developed 2,000 300 9 300 19 5,595 180% Developed 2,500 260 10 260 24 6,240 150% EMEA 15% 3,000 400 11 400 22 8,800 193% EMEA 2,000 250 12 250 17 4,250 113% EMEA 2,000 250 13 250 16 4,000 100% EMEA 3,000 350 11 350 18 6,300 110% EMEA 6,000 400 16 400 20 8,000 33% Portfolio Value $100,000 $116,260 16.26% The template is tracking the record of fund investment with the return value and percentage composition of stock holding in portfolio. Make the adjustment to values as per need. 9
- 10. Risk & Return W.R.T Proportionate Investment in Stocks & Bonds Reward Risk Stocks Bonds 0% Stocks, 100% Bonds Minimum Risk: 70% Stock 30% Bonds 55% Stock 45% Bonds 20% Stock 80%Bonds 35% Stock 65% Bonds 100% Stocks, 0% Bonds Define the different financial investment portfolio on the level of risk and reward. You can use it as per need. 10
- 11. Measuring Stock Volatility (Risk) Fund # of Shares Cost/Share Value Beta Value x Beta PTCIX 550 $11.43 $6,286.50 2.84 $17,853.66 VTTVX 300 $12.27 $3,681.00 1.1 $4,049.10 VGSNX 600 $8.97 $5,382.00 0.63 $3,390.66 FGCKX 250 $72.44 $18,110.00 1.23 $22,275.30 FLCEX 800 $9.62 $7,696.00 1 $7,696.00 Total: $41,155.00 Total: $55,264.72 Portfolio Beta 1.3428271 Measure the beta value of each fund with the cost/share of each asset 11
- 12. Portfolio Return Analysis Date Portfolio Return Market Return Risk Free Rate (Rf) Beta Alpha Jan-2015 4.11% 2.51% 1.25% 0.45 2.20% Feb-2015 2.25% 2.65% Text Here Text Here Text Here Mar-2016 3.28% 1.58% Text Here Text Here Text Here Apr-2015 5.05% 3.74% Text Here Text Here Text Here May-2015 1.84% 0.22% Text Here Text Here Text Here Jun-2017 0.81% -3.56% Text Here Text Here Text Here Jul-2015 1.52% -3.88% Text Here Text Here Text Here Aug-2017 2.99% 1.65% Text Here Text Here Text Here Sep-2015 4.74% 4.21% Text Here Text Here Text Here Oct-2016 3.99% 2.11% Text Here Text Here Text Here Nov-2015 3.21% 3.89% Text Here Text Here Text Here Dec-2018 5.69% 4.12% Text Here Text Here Text Here AVERAGE 3.29% 1.60% 12
- 13. Calculating Asset Beta Levered Beta Equity Beta Tax Rate Net Dept ($M) Equity ($M) Debt/Equity Asset Beta Stock 1 1.21 35% 524 2,542 21% 1.07 Stock 2 1.08 33% - 15,298 0% 1.08 Stock 3 0.87 28% (255) 3,275 -8% 0.92 Stock 4 1.58 34% 785 1,027 76% 1.05 Stock 5 1.35 30% 1,027 9,217 11% 1.26 Average 1.22 32% 416 6,272 20% 1.07 Median 1.21 33% 524 3,275 11% 1.07 Equity -> Asset Beta 13
- 14. Portfolio Value at Risk Mkt Value Portfolio Weight(%) Active Weight (%) Portfolio risk Port risk contribution Correlation Port risk contribution (%) Portfolio Value-At- Risk($) 9,872,378,620 100% 0% 14.79 14.79 1.00 100% 693,379,355 Equity 6,180,148,506 _ 3.20% 22.67 14.14 0.996 _ 665,341,708 Fixed Income 2,635,925,092 _ -13.90% 4.29 0.04 0.031 _ 53,679,517 Private Real Estate 542,948,245 5.50% 5.50% 13.47 0.50 0.679 3.40% 34,726,130 Hedge Fund 394,888,234 4.00% 4.00% 4.67 0.12 0.622 0.79% 8,753,434 Cash 118,468,543 1.20% 1.20% 0.00 0.00 0.000 0.00% 0 The template give the broad summary of company’s financial assets with the estimate of risk measure and market value. 14
- 15. Ranking the Passive Income Streams Passive Income Source Risk Return Feasibility Liquidity Activity Total Score Private Equity 4 7 4 2 10 27 Real Estate 5 8 7 3 6 29 Certificates of Estate 10 1 10 3 10 34 Fixed Income/Bonds 4 5 10 8 9 36 P2P lending 7 7 9 6 8 37 Real Estate Crowdsourcing 7 9 6 6 10 38 Dividend Investing 7 6 10 8 9 40 Creating Your Own Products 10 8 8 8 8 42 Score Methodology: 1 – 10, with 10 being the least risky, highest return, most feasible, most liquid and least amount of activity required The following table shows the five factor to rank the passive income of the organisation. Use the table as per need. 15
- 16. Impact of Risk Risk Impact Cause Interest Rate Risk- Debt Debt Changes in interest rate environment Interest Rate Risk - Assets Investments Changes in interest rate environment Investment Risk (Equities) Investments Changes in investor sentiment Credit Provider Risk Debt Provider rating downgrade Renewal/Refinancing Risk Debt Changes in lending appetite Operational Risk EBITDA Variability in operating performance Basis Risk Swaps Imperfect hedge Remarketing/Put Risk Debt Market conditions, enhancer downgrade Mark to Market Risk Swaps Changes in interest rate environment Counterparty Downgrade Risk Swaps Swap counterparty downgrade 16
- 17. Risk and Return in Financial Management Icons Slide 17
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