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Zeus Asset Management Inc Case Solution
There is a possibility that favorable financial consequences will follow from placing a priority on quality. It invests in municipal bond funds and bases its business strategy on collaborating with other organizations, which is in stark contrast to its primary rivals, who provide services that are not centered on the requirements of their customers, and who do not invest in municipal bonds funds. Risk-adjusted metrics are going to be used instead of traditional ones because Zeus has the presumption that investors will not pay for advantages that may be easily gained by taking risks that are comparable to those that are already being taken. The investors want Zeus to provide returns that are comparable to those produced by the benchmark. It is vital to bear in mind that each way of calculating risk-adjusted returns has its own set of advantages and downsides when making comparisons across various funds (Allayannis, 1998).
Following questions are answered in this case study solution
What is Zeus’s investment philosophy? Who are its primary investors? What are the issues surrounding individually managed accounts (IMAs)? What are the differences between IMAs and mutual funds regarding their management and target investors?
Comment on the current investment process of Zeus’s equity growth and bond funds.
Evaluate Zeus’s strategy as an investment company. How do you see its future?
Evaluate the performance of Zeus’s equity, bond and balanced funds. In particular, consider:
a. Total returns relative to appropriate benchmark
b. Sharpe ratios
c. Treynor measure
d. A risk-adjusted measure based on one-factor model (Jensen’s alpha)
e. A risk-adjusted measure based on Gruber’s four-factor model
f. A risk-adjusted measure based on Graham-Harvey
What are the relative merits of the above performance metrics? How should one decide on which index is the relevant one to evaluate each fund? What kind of information do we obtain using each measure?
Case Analysis for Zeus Asset Management Inc
1. What is Zeus’s investment philosophy? Who are its primary investors? What are the issues surrounding individually managed accounts (IMAs)? What are the differences between IMAs and mutual funds regarding their management and target investors?
As a consequence of this investing philosophy, greater investment outcomes might be produced over many years by implementing a cautious, risk-averse, and quality-oriented investment management strategy. The firm's investment strategy was based on the premise that better investment performance might be produced by a cautious, risk-averse, and quality-oriented investment management approach. Investing returns can only be attained via a risk-averse and cautious investment strategy that is implemented over time. A risk-averse and cautious strategy for risk management is used by Zeus's management in order to produce long-term investment returns or returns on investment over time. This guarantees that the company's portfolio manager works hard to achieve the best performance that is comparable to the benchmark's performance. Investment returns are sought in long-term, above-average profits growth for companies in an equity fund. Individually managed accounts must have a minimum balance of $ 2 million. The client's investment goals were taken into consideration when Zeus built portfolios for them, and the volatility and time horizon of those assets were then balanced. Specialty funds are available to investors who do not meet the minimum capital requirements, such as individuals or small businesses. Because of the local equities, bond, and worldwide equity markets, Zeus has created various mutual funds. As a result, Zeus also offered a diversified portfolio of fixed-income assets and high-quality stocks. Individuals and institutional investors are Zeus's principal investors, both of whom have a stake in the company. The vast majority of institutional investors come from corporate endowments, foundations, and charitable endowments. Individual investors, on the other hand, are often rich people who are wary of taking risks with their money and who want to spread out their investments over extended periods of time in order to maximize their returns. The typical investors in Zeus were people with significant personal wealth.
2. Comment on the current investment process of Zeus’s equity growth and bond funds.
For each new director recruited by the company's top executives, a new investment strategy was implemented for the company's existing portfolios. In addition, he devised a set of rigid guidelines for the administration of these various portfolios. As a result, the corporation was able to better regulate and monitor its operations. In the present investing process of Zeus, management was able to find successful bonds and shares thanks to the current investment strategy. The bonds and stocks were then turned into portfolios that reduced overall risk and increased overall returns. As a result of the firm's risk-averse and conservative investors, the corporation was a suitable investment option. For all its benefits, Zeus' new investment strategy may have required the corporation to expend more resources, such as recruiting experienced fund managers. Large sample size and higher reliability are provided by screening a universe of 2,000 stocks. Checking for long-term viability and weeding out companies with negative changes in expected profits improves the long-term prospects of the overall portfolio. The judgment becomes more precise when the expensive stocks have been removed. In order to ensure that the portfolio selection process was as efficient as possible, a detailed assessment of each equity was done. It is also possible to learn more about the goals by conducting an interview with the management. Setting up the procedures to filter such a vast number of stocks and adhering to them may be costly and time-consuming. Second, it might be difficult to pin down what it means to be sustainable. Third, the cost of doing research on firms and stocks requires a bigger investment of resources, both monetary and human. This investment might be in the form of either time or money. To put it another way, the new method is not only more trustworthy but also more costly than the older one.
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