A mutual fund that will consist of portfolio of 10 to 20 companies. Create a prospectus for the portfolio. Conduct a risk analysis and asset allocation.

Developing an Attractive Mutual Fund

Emerging mutual fund managers must be careful to create an offering that is consistent with current market trends and that will be attractive to potential investors. Prospectus are created by investment bankers to inform potential investors of important information needed to make educated decisions.

An investor is seeking a fund that will meet their objectives. The fund needs to have a clear objective outlined (capital appreciation, stable income, etc.) and an investment policy (money market fund, equity fund, etc.) to achieve that objective. Than it is up to the manager to explain why the strategy is the correct strategy to achieve the investor's financial goals. Not only that does the prospectus line out the investment objective and the type of strategy, it will also include financial data, such as asset allocation and past performance. The prospectus will also include an expense table which lays out the fees associated with owning the fund.

Written Project Guidelines:

Name of the Mutual Fund

Name of managers of mutual fund Date Logo (optional)

Topics (be as thorough as possible) Objective

Investment Strategies Portfolio Management Historical Performance Fees

Economic Environment (macroeconomic, sector, security-specific, etc.) which enhance the feasibility of the strategy

Tables/charts (graphics) which may enhance the value and understanding of the presentation

4-7 pages , 12-point font, and standard margins

Cite (credible) sources

Excel must be submitted

Prospectus Instruction

Fund Objective

Clearly write out your investment objective. What type of investor are you trying to attract?

1. Strategy Definition

It is imperative to clearly define the importance of the fund's investment strategy. Be as specific and detailed as possible. Here are just a few things to think about? Will you be a passive or active manager?

What types of market inefficiencies are you attempting to take advantage of (mispricings)?

Is your strategy broad or specific in nature? Is the fund based on a specific sector (i.e. taking

bets)? What are unique factors that need to be monitored and/or can be taken advantage of?

Are you taking short or long positions? Both?

Are you using options, futures, etc. to hedge positions?

Is this an international or domestic strategy?

How will you define and explain the investment process to potential investors?

Is the strategy repeatable?

2. Portfolio Management

Assume you have $250,000 to create the mutual fund. Create a portfolio consisting of 10 to 20

companies. Give a brief overview of each company.

What is the asset allocation of your portfolio?

Why did you choose these companies? What is weight allocation for these companies.

o Provide company analysis, ratios (P/E, Market-to-Book, Profit margin, Dividend Yield and the Earnings Per Share)

3. Historical Performance

A fund's historical performance is a key attribute to the prospectus. The investor wants to know

what has been the past risk and return for this fund.

What has been the average annual total return for the last year, 5 years, and 10 years.

Calculate the risk for the portfolio. (Standard Deviation and Beta) for the last year, 5 year, and

10 years.

Compare the risk and return of the portfolio to the market. What is your benchmark? Why did you choose this benchmark?

What is the Sharpe ratio of your portfolio?

What are some risk factors that your fund will face?

How can you keep your fund alive and well when markets are not acting as planned (do you

need to make some kind of hedges)?

4. Fees and Expenses

Mutual funds need to be up front with their fees and expenses. Give a brief overview of what your mutual fund will charge their investors. What will be the fund's fee structure? What will be the operating expenses?

5. Conclusion