Website: http://www.rhsmith.umd.edu/cfp
Blog: http://blogs.rhsmith.umd.edu/financialpolicy
Twitter: @CFPSmithSchool
Contact us: cfp@rhsmith.umd.edu
CFP Annual Portfolio Management Competition INFORMATION AND LOGISTICS Key Requirements and Deadlines • Students must submit their portfolios by each Sunday (6pm) throughout the competition period. The file should reflect the team performance as of Friday’s close of business. • The excel file must be in the format provided should be mailed to: umdcfp@yahoo.com with the team name and week ending date in the subject line. For example, the subject line should read: Team XYZ for week ending September 19, 2014 (this would be submitted by September 21,2014). • A one-­‐page interim review of each team’s trading strategy is due October 20, 2014. • The final two to three page report is due November 30, 2014. • Reporting requirements: 1 inch margins, 12 point font Times/Ariel, up to two pages of graphs or tables will be permitted as an appendix. • Late submissions will not be accepted. • Failure to submit weekly portfolio performance report or evaluative report on time will result in disqualification from the competition. • Registered students will receive an invite to the CFP Portfolio Management Google Hangout page. All communications will be posted on this wall throughout the competition period. Students should post any questions regarding the competition on this wall. Tracking Your Portfolio • Students should track their portfolios using Yahoo Finance’s My Portfolio tool. See the excel file, “Sample Portfolio” for required columns and order to be submitted, and screen print of Yahoo page. Students may use different tools to track and manage their portfolios, but excel files should be submitted in the exact format provided. • The excel files submitted should show each trade implemented and the gain/loss associated with each trade in your portfolio. Buys and sells of the same security should appear as separate transactions. If you choose to use the Yahoo Finance portfolio tool, it will ask you if you want to collapse buys and sells into a single position – DO NOT check this box. • Yahoo Finance allows you to enter a select number of shares, trade date and the price paid for each security. Since we do not have a system that tracks trades in real time, the UMD Honor Code will be strictly enforced. Trades will be randomly audited each week. • In order to simplify accounting for fees and transaction costs, a flat 50bp trading fee will be assessed to each trade executed (50bps x the notional trade value). See the excel file on how to calculate. • Cash should be held in the money market fund: FLTXX http://www.rhsmith.umd.edu/centers-­‐excellence/cfp PORTFOLIO BASICS Fees When trading an actual portfolio investors face a number of different types of fees and expenses: general management fees, transaction fees, agency and registration fees, and sales load fees. For example, mutual funds typically carry a much higher fee than an ETF or index fund. In order to simply the return calculations and discourage high frequency trading, this competition will assess a 50bps fee per transaction to be assessed at the end of the competition period. Risk and Diversification Professional investors typically evaluate investment opportunities or managers based on the information ratio (IR). The IR measures an investor’s ability to generate returns in excess of a certain benchmark and how much return one can generate per unit of risk. The student teams will not be required to calculate the exact risk of their portfolios nor will they be evaluated versus a certain benchmark, but they should be aware of the risk in their investments. The judges will evaluate each team’s attention to diversification and risk in their final analyses. The teams will be evaluated based on the quality of their initial strategy (30%), their overall return (30%) and their ex-­‐post analysis (40%). Sample Asset Allocation Strategies Students are permitted to invest in any mix of holdings as they see fit in order to maximize returns, but investors should always be aware of the total risk in their portfolios. The traditional asset allocation strategy for one’s personal portfolio is a mix of 60% stocks, 40% bonds, though there is considerable research and literature challenging whether this is still the right strategy. Below are several, sample benchmark portfolios used by two of the largest University endowment funds. Students can use these as starting points when thinking about how to allocate their portfolio and tweak the allocations based on their market outlook and preferences. Harvard Endowment Benchmark Yale Endowment Benchmark Equities US Stocks 30% Domestic Equity 11% US Real Estate 20% Foreign Equity 11% International Stocks 15% Emerging Markets 11% EM Stocks 5% Fixed Income Inflation-­‐Indexed Domestic 4% Bonds 5% Foreign 2% US Bonds 15% Inflation-­‐Indexed 3% High Yield 2% Simplified Diversified Benchmark Alternatives Private Equity 16% Global Equities 50% Public Commodities 2% Inflation-­‐Indexed Natural Resources 13% Bonds 15% Real Estate 10% Real Estate (Global) 20% US Bonds 15% http://www.rhsmith.umd.edu/centers-­‐excellence/cfp MUTUAL FUND, ETF AND INDEX FUND PROVIDERS Students can invest in any publically traded funds provided they are not short or leveraged funds. The following asset managers offer a wide variety of investable funds. We have also provided links to the top asset managers for additional investment ideas. Top Three Asset Managers Blackrock iShares http://www.ishares.com/us State Street Global Advisors SPDR Funds https://www.spdrs.com/ Vanguard, mutual and index funds https://investor.vanguard.com/corporate-­‐portal/ Local Asset Managers Legg Mason http://www.leggmason.com/solutions/individuals.aspx T.Rowe Price https://individual.troweprice.com/public/Retail?src=CorpHome For additional fund families please visit one of these sites http://etfdb.com http://www.institutionalinvestor.com/Research-­‐and-­‐Rankings.html http://online.barrons.com/public/resources/documents/BARRONS_TOP_40_LARGEST_WEALTH_MAN
AGEMENT_FIRMS_2013.pdf RECOMMENDED READING Visit the Resources section of the CFP’s website for additional resources. News and Media Outlets Bloomberg Federal Reserve NYSE Google Finance EDGAR Wall Street Journal CFA Market Insights Blog Financial Times Wall Street City NY Times NASDAQ The Economist Yahoo! Finance Business Insider
http://www.rhsmith.umd.edu/centers-­‐excellence/cfp Books Too Big To Fail Andrew Ross Sorkin Thinking, Fast and Slow by Daniel Kahneman Fooled By Randomness by Nassim Taleb One Up on Wall Street by Peter Lynch Money Masters of Our Time by John Train The Intelligent Investor by Benjamin Graham The Psychology of Investing by John Nofsinger Investment Biker: Around the World with Jim Rogers by Jim Rogers On Competition by Michael Porter When Genius Failed: The Rise and Fall of Long-­‐Term Capital Management by Roger Lowenstein Manias, Panics, and Crashes: A History of Financial Crises by Charles Kindleberger Liar’s Poker by Michael Lewis The Alchemy of Finance by George Soros Staying Ahead of the Curve by George Soros Common Sense on Mutual Funds by John Bogel The Intelligent Asset Allocator: How to Build Your Portfolio to Maximize Returns and Minimize Risk by William Bernstein Berkshire Hathaway Annual Reports (For a consolidated version of Buffett's writings, see The Essays of Warren Buffett: Lessons For Corporate America by Larry Cunningham.) For updated commentary Goldman Sachs Recommended Reading https://www.quantnet.com/threads/the-­‐goldman-­‐sachs-­‐suggested-­‐reading-­‐list.4916/ Additional Reading: blogs, white papers and articles Most of the asset managers such as: Blackrock, SSGA, Vanguard, and Pimco all post market updates and white papers on their websites. We recommend reviewing these sites along with the major news outlets on a regular basis. http://www.rhsmith.umd.edu/centers-­‐excellence/cfp The 5 Percent Solution by Clifford Asness and Antti Ilmanen Principles by Ray Dalio History of the All-­‐Weather Fund: The Foundation of the ‘Risk Parity’ Movement by Ray Dalio Post Modern Portfolio Theory: Engineering targeted by Ray Dalio Buffett’s Alpha by Andrea Frazzini, David Kabiller, and Lasse H. Pedersen Diversification and Beyond: The Comparative Benefits of Multi-­‐Strategy Investing by DE Shaw & Co THE WSJ’S 50 FINANCIAL TWITTER FEEDS TO FOLLOW Use this link: https://twitter.com/WSJ/financial-­‐accounts/members @Accenture – Tweeting links to white papers and other writings from the management consulting firm. @BBVAResearch – Research from the economics department at Spain’s BBVA Group. In Spanish and English. @bespokeinvest – Research firm Bespoke Investment Group’s market commentary and individual stock analysis. @blackrock – Market perspectives from fund manager BlackRock. @BofAML – News and analysis from Bank of America Merrill Lynch. @bondvigilantes – Commentary on bond markets by M&G’s retail bond team. Comes with disclaimer that it’s for investment professionals only. @capitalprofile – Analysis on business families and controlling shareholders in Asia, from Mergermarket Group. @CBOE_data – The Chicago Board Options Exchange account is useful for options enthusiasts who want a live feed of large or notable trades in their timeline. @CivicScience – Market research and consumer sentiment data. @clearpthcapital — This San Francisco Bay Area registered investment adviser tweets links to market commentary. @ColumbiaMgmt – An asset manager that tweets research and market insights. @CowenResearch – One of the few firms that publishes views on individual stocks from its analysts on Twitter. http://www.rhsmith.umd.edu/centers-­‐excellence/cfp @CreditSpectrum – Global credit analysis from Hermes Fund Managers. @csapac — Credit Suisse Asia Pacific team, tweeting data, charts and facts on APAC companies and economies. @csresearch – Macro research from Credit Suisse. @DaiwaEurope – economic research, mostly on Japan and Europe, from Daiwa Capital Markets. @Dealogic – Insights and data on M&A, deals and banking. @EU_Eurostat – Statistical office of the EU, one for the charts fans. @FactSet – Links to research by the data provider and also live tweets from investor conferences. @GaveKalCapital – U.S. investment adviser, good for economic research fiends and chart fanatics. @GoldmanSachs – The clue’s in the name here. Tweets market analysis–often in the form of videos from its executives–as well as corporate news. @GothamResearch – The Twitter home of the rather secretive people who brought down Let’s Gowex last month. @GuggenheimPtnrs – Macro-­‐economic views and market perspectives from this privately held financial services firm. @Hermes_fm – Insights from Hermes Fund Managers, with disclaimer that it’s for investment professionals only. @LPLResearch – Market commentary from U.S.-­‐based broker dealer and consultant LPL Financial. @MarkitEconomics – Manufacturing data and other insights from Markit. @mckinseychina — Research on China business and economics from the global consultancy firm. @MerrillLynch – Investing strategies, charts and research from Merrill Lynch. @MS_Econ – Views from its economics team at Morgan Stanley. @MStarETFUS – Market commentary and ETF research from Morningstar. @muddywatersre – Track the latest campaigns from colorful short-­‐selling firm Muddy Waters, which had its first successes in China. @NDR_Research – International markets analysis and commentary from Ned Davis Research. @NordeaMarkets – Nordic and European economics research. @Open_Markets – Links to writings from CME Group. http://www.rhsmith.umd.edu/centers-­‐excellence/cfp @PictetWM – Macro research from Pictet Wealth Management. @PIMCO – Investment outlooks (and the occasional personal tweet) from Pimco’s Bill Gross and others. @RA_Insights – Research Affiliates shares some interesting research and commentary, along with plugs for the specialized index funds it helped pioneer. @RBS_Economics – News and information from The Royal Bank of Scotland’s economists. @SEBGroup – Tweets about Nordic economics, sometimes in Swedish. @sentimentrader – Monitoring stock, bond and commodity sentiment for individual and institutional traders and investors. @SNLFinancial – News and research largely focused on banking and insurance. @SPCAPIQearnings –For earnings-­‐season junkies, S&P Capital IQ tweets from this account about earnings reports and aggregated data from the S&P 500 earnings season. @SPCapitalIQ – Fundamental and quantitative research from S&P Capital IQ. @StoneMcCarthy – Economics and market research from Stone & McCarthy Research Associates. This firm first spotted an error in a widely watched manufacturing survey that roiled stocks in June. @SucdenFinancial – A derivatives broker that handles equities, currencies and metals. They tweets charts, research and other useful information. @threadneedleAM – Corporate news with a smattering of thought-­‐provoking economics research from Threadneedle Investment. @tickersense – Views on markets and commentary from Birinyi Associates. @TRowePrice – The investment firm tweets research, interviews with its portfolio managers and more. @UBSAmericas – Economic and market research and commentary from UBS, including views from veteran floor trader Art Cashin. @UBSemea – Daily economic research and podcasts from UBS covering Europe, the Middle East and Africa. http://www.rhsmith.umd.edu/centers-­‐excellence/cfp http://www.rhsmith.umd.edu/centers-­‐excellence/cfp