PROBLEM #1

The aim of the exercise is to compare three existing mutual funds managed by Goldman Sachs or Morgan Stanley in the United States:

- Goldman Sachs Large Cap Value A,

- Goldman Sachs Government Income A,

- Morgan Stanley Mid Cap Growth A.

Browsing on the Internet, you found the characteristics for each of those four funds. Those characteristics, given in the appendix, are to be carefully read before you start answering any question.

1) What main differences do you make between GS Large Cap Value A and MS Mid Cap Growth A? Explain clearly how you may differentiate the two funds. What does it imply in terms of risk and return? Use all possible figures to justify your opinion.

2) What main differences do you make between GS Large Cap Value A and GS Government Income A? Explain clearly how you may differentiate the two funds. What does it imply in terms of risk and return? Use all possible figures to justify your opinion.

3) Give an interpretation of the Beta and Alpha values obtained for the funds GS Large Cap Value A

4) The S&P 500 is a value-weighted average of the stocks of 500 largest listed companies in the United States. What advantages do you find compared to a price-weighted average index?

Appendix for Problem #1 AAA 3.84 Goldman Sachs Government Income A Portfolio Stats Style Box for Bond Holdings Credit Information Credit Quality Average Credit Quality Average Duration Modern Portfolio Theory Statistics Standard Index Measurement LB US Agg Bond TR USD Beta (1-year) 0.89 Alpha (1-year) -0.11 Interest Asset Allocation Volatility Measures Type % of Net Assets Standard Deviation 2.62 Cash 12.9 Sharpe Ratio 0.14 Bonds 87.1 Treynor Ratio 0.39 Foreign (as a % of portfolio) 6.8 Scale document down Morgan Stanley Mid Cap Growth A Portfolio Stats Volatility Measures Size 14 53 Median Market Cap $6.55 Bil $6.71 Bil 0.70 Market Capitalization Sharpe Ratio % of Portfolio Giant 6 69 0.00 Treynor Ratio Large 22.73 Style Box for Stock Holdings Medium 70.71 Lago Small 6.56 Micro 0.00 Investment Valuation Stock Portfolio Category in Price/Earnings 32.16 23.83 Price/Sales 3.11 2.00 Modern Portfolio Theory Statistics Standard Index Investment Valuation Measurement S&P 500 TR Beta (1-year) 1.47 Asset Allocation Alpha (1-year) 5.55 Type % of Net Assets Cash 4.7 Stocks 95.3 Foreign (as a % of portfolio) 19.1 Fund Category Standard Deviation Size 8.73 0.39 3.33 Goldman Sachs Large Cap Value A Portfolio Stats Volatility Measures Fund Category Standard Deviation Median Market Cap $54.43 Bil $46.05 Bil Sharpe Ratio Market Capitalization % of Portfolio Treynor Ratio Giant 52.89 Large 36.37 Style Box for Stock Holdings Medium 10.75 Lango Investment Valuation Stock Portfolio Category Price/Earnings 14.67 14.65 Med Price/Sales 1.40 1.34 Sna Modern Portfolio Theory Statistics Standard Index Measurement S&P 500 TR LUL Valuation Beta (1-year) 0.96 Alpha (1-year) 0.44 Asset Allocation Type Cash Stocks Foreign (as a % of portfolio) % of Net Assets 0.5 99.5 4.0 Appendix for Problem #1 AAA 3.84 Goldman Sachs Government Income A Portfolio Stats Style Box for Bond Holdings Credit Information Credit Quality Average Credit Quality Average Duration Modern Portfolio Theory Statistics Standard Index Measurement LB US Agg Bond TR USD Beta (1-year) 0.89 Alpha (1-year) -0.11 Interest Asset Allocation Volatility Measures Type % of Net Assets Standard Deviation 2.62 Cash 12.9 Sharpe Ratio 0.14 Bonds 87.1 Treynor Ratio 0.39 Foreign (as a % of portfolio) 6.8 Scale document down Morgan Stanley Mid Cap Growth A Portfolio Stats Volatility Measures Size 14 53 Median Market Cap $6.55 Bil $6.71 Bil 0.70 Market Capitalization Sharpe Ratio % of Portfolio Giant 6 69 0.00 Treynor Ratio Large 22.73 Style Box for Stock Holdings Medium 70.71 Lago Small 6.56 Micro 0.00 Investment Valuation Stock Portfolio Category in Price/Earnings 32.16 23.83 Price/Sales 3.11 2.00 Modern Portfolio Theory Statistics Standard Index Investment Valuation Measurement S&P 500 TR Beta (1-year) 1.47 Asset Allocation Alpha (1-year) 5.55 Type % of Net Assets Cash 4.7 Stocks 95.3 Foreign (as a % of portfolio) 19.1 Fund Category Standard Deviation Size 8.73 0.39 3.33 Goldman Sachs Large Cap Value A Portfolio Stats Volatility Measures Fund Category Standard Deviation Median Market Cap $54.43 Bil $46.05 Bil Sharpe Ratio Market Capitalization % of Portfolio Treynor Ratio Giant 52.89 Large 36.37 Style Box for Stock Holdings Medium 10.75 Lango Investment Valuation Stock Portfolio Category Price/Earnings 14.67 14.65 Med Price/Sales 1.40 1.34 Sna Modern Portfolio Theory Statistics Standard Index Measurement S&P 500 TR LUL Valuation Beta (1-year) 0.96 Alpha (1-year) 0.44 Asset Allocation Type Cash Stocks Foreign (as a % of portfolio) % of Net Assets 0.5 99.5 4.0