Finance Case Study

Finance Case Study is one of the highly expected exercise during MBA Admission selection process as MBA course is all about business and case assignments. This assignment will also give a glimpse of job profile of Finance domain and candidates who are eyeing for a role with Top Investment banks and other financial firms.

Let us solve a Finance Case Study which needs some simple logic and some financial awareness.

Finance Case Study Statement : Suppose you are an Investment banker or  a Wealth Manager or a Financial planning adviser. One of your HNI client has approached you with a cash of INR 20 cr and he needs your financial advisory to increase his assets.  What will be your action plan to give a rise in the asset worth INR 20 cr ?

Solution :

OPTIONS/SCHEMES WITH IN DEPTH ANALYSIS TO INCREASE THE VALUE OF INR 20 CR

The options or schemes for increasing the value of INR 20 Cr depends on the risk factors. We can go ahead with investment if we know what kind of risks we are going to take.

INVESTMENT STRATEGY

First let us consider investment strategy overview:

  • RISK AVERSE

A focus on capital preservation by investing in a portfolio of primarily fixed income. It is designed for those who are most comfortable with a conservative approach and have a lower tolerance for portfolio fluctuations. The investment time horizon is typically three years or greater.

  • CONSERVATIVE

Seeks to provide capital preservation and limited growth of capital by investing in a portfolio of primarily fixed income with some exposure to equity. It is designed for those who are most comfortable with a conservative growth approach and have a lower tolerance for portfolio fluctuations. The investment time horizon is typically 3- 5 years or greater.

  • BALANCED

The objective of this portfolio is to provide a balance between capital preservation and capital appreciation. It is designed for those who are most comfortable with a balanced approach to growth and have an average tolerance for portfolio fluctuations. The investment time horizon is typically 5-10 years or greater

  • MODERATE

The ‘Balanced Income’ profile is most appropriate for an investor who can tolerate a modest amount of investment risk, but also desires some capital growth over a longer-term time horizon. The primary objective of an investor within this risk tolerance range is to achieve a balance between growth and income, with a bias toward income and avoidance of extreme risk.

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ASSUMPTIONS

Investment objectives (in rank order): 1. Capital Appreciation

  1. Income
  2. Liquidity
  3. Lower Volatility

Risk Tolerance:   Moderate

Investment Time Horizon:  10 to 20 years

Liquidity Needs: Over 20 years

Account Risk Profile: 4 (On a scale of 1-10, Moderate)

DESCRIPTIONS OF INVESTMENT OBJECTIVES                                    

Income: For investors seeking regular income with low to moderate risk to principal.

Lower Volatility: For investors seeking to reduce uncertainty with respect to change in              security value.

CapitalAppreciation:For investors seeking capital appreciation with moderate to high risk to principal.

Speculation:For investors seeking high profits or quick returns with considerable possibility of losing most or all of their Investment.

ASSET ALLOCATION

The below percentage shows the percentage of the total asset (20 crore) that is to be             allocated to various schemes so as to increase the total value of the wealth for this Finance Case Study.

 

Risk Averse Conservative Balanced Moderate
Fixed Deposits (AAA Rated)        15% 10% 5% 5%
Liquid Mutual Fund                            5% 5% 5% 5%
Short Term Debt 15% 5% 5% 5%
Medium Term Debt 30% 20% 15% 10%
Fixed Maturity Plans 35% 25% 17.5% 10%
Long Term Debt 0% 5% 5% 2.50%
Hybrid Fund: Conservative 0% 20% 30% 37.50%
Pure Equity 0% 10% 17.50% 25%
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