Personal Portfolio Management Prof. Georges Hbner Case: setting a personal portfolio offering Part a Market Data Preparation In finance.yahoo.com (or any other data provider), select three mutual funds with at least 3 Morningstar stars and from different allocation categories (15-30%, 30%-50%, 50%-70% and 85%+ equity) with a positive average return over the 2016-2020 period the S&P500 index, and three indexes belonging to different asset classes of your choice, with an intent to have a diversified portfolio, with a positive average return over the 2016-2020 period. Download the 5-years monthly historical data from 2016 to 2020 on finance.yahoo.com. Compute the total returns on the basis of the adjusted close. Retrieve the series of US 4-week Treasury bill rate for the same period (http://research.stlouisfed.org/fred2/series/TB4WK) and convert the series in monthly returns (= divide by 12). Personal Data While profiling Mr. Kindliss, you identify that he is slightly above average in terms of risk tolerance. Furthermore, he considers that the return of his portfolio is way too short to sustain his standards of living. He wishes to make sure that he and his wife obtain a yield of at least 3% above the expected inflation without taking the risk of too much eroding their capital. Mr. Kindliss has a personal savings account with revolving term that yields a net 0.9% yearly for an amount of 500,000$. The next term is in a couple of days; he will then have to decide at this moment whether he wants to reinvest the sum under the same conditions. Following the decease of his brother, Mr. Kindliss inherits a portfolio of ca. 1,850,000$ after taxes and fees. The composition of this portfolio, as considered now, is (by chance) split in equal parts (25%) between cash and the three indexes that you have selected above. With this material, do the following: a. Compute the risk-return relationship for Mr. Kindlisss current portfolio and various combinations (long positions only!) of these funds and indexes and report them on a graph (if you manage to construct an efficient frontier, this is even better!); b. Identify the best of these combinations when combined with the risk-free investment; c. Draw an objective portfolio offering based on three to five investor profiles on the basis of different levels of their risk aversion and with a well-thought segmentation.

d. Compute as many classical performance measures of the current portfolio of Mr. Kindliss as you can and comment your results; e. Make an investment proposal to Mr. Kindliss on the basis of your portfolio offering in question c of part a, and show whether its performance measures (including one that is preference-adjusted) dominate the ones you have computed in question d above; f. Mr. Kindliss imposes you to have at least 20% of his wealth invested in each of the three funds above. How does it change your analysis?