The Clients

Thee of Jack 'Wiring 'sclients decided to add to their allocations of Chinese equities and asked

his advice on the appropriate investment instruments.

James Chail age $3$hat$(i),$ was an employee in a small local company. He had some experience in

tradiag maint: d stocks himself, but the investment was not successfal, so he had quit several

yesrs hefore. He was optimistic about China's economy, and positive on is progress in

integnsing itself into intemational capital markets. He was bullish on the links with China,

which invilyed not only stocks listed in Mainland China, but also those listed in other Greater

China markets like Hong Kong or Taiwan, and operated in or derived their revenue largely from

tis axainland market. Chan had no other outstanding investments at this time, and would

estat lish a portfolio consisting solely of imestments in Greater Chima equities. Katie Lee, age $45,$ had founded her owa company ten years before and was its CEO. Sh$-$bal

great success and had accumulated considerable wealth. She had already invested in seierai

matal funds that targeted Greater China equities, using the MSCI China Index as a portstio

benchmark. She worried about the political risks in developed markets, and liquidated sore ot$\text{'}$

her investments in US and European equity markets. She planned to re$-$riucite taese.

investments to Greater China, as she believed the Chinese market was relatively isoisted and

less correlated with intemational equity markets. She would establite an alditions sub$-$

portiolio and expected to enhance the risk$-$return tradeoff of the whole Greaiy Cina porfolio.

Lee was also a true believer in valoe investing, and had already impleriented this methodology

in her portfolio. She also wanted this new sub$-$portfolio to follow a salu$-$ sieregy$-$

Thomas Tung, age $58,$ had jast retired from his $35-$year career by means ot his company's

voluntary retirement program. He had diverse imestments, inclating real estate, equities and

life insurance. In equity investment, he was a bit conservative a$.$ta caly had passive investments

in iShare MSCI Ching ETF $($exchange traded fund$).$ The ETF trachel the MSCI China Index,

which represented the overall performance of equities in meviais. Chuss and Hong Kong. With

the lump$-$sum benefit offered by voluntary retirement lung wanted to add some active

investments that used the MSCI China Index as a benchmsti. He would keep the ETF he held

as his core portiolio, and expected the new investment to eltance the risk$-$adjusted return

without deviating significantly from the index. Toug was aware that many funds targeting

Greater China equities had allocations in Taraan cquities, but he was not familiar with the

Taiwan market and didn't want too much exposire isi it hie would make sure that the allocation

to the Taiwan market was less than $20\%.$

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answer the following questions

Qestion: Calculate the following risk adjusted measures for evaluating the performance of the four funds:

$$ Sharp ratio

$$ Treynor ratio

$$ Information ratio

Define which of these performance measures is more appropriate for each of the three clients, and select one fund for each client based on its performance. $($Value Partners Group Limited Case Study$)$