Venture Capital and Private Equity Assignment
- Subject Code :
FIN45
One day you wake up and find yourself as CEO of a newly set up pension fund for people working foryour state (under the age of 45 as of today). The government passed all its liabilities to this new fundand endowed it with 100 billion USD. Like Pontius Pilate, they washed their hands of any furtherresponsibilities.Nowitsyourjobtomakesurethefund canliveuptoitsliabilities.Goodluck.
Theliabilitiesandendowmentaresuchthat youneedto produce7%p.a. forthenext20years.
Consider its optimal portfolio from a (1) CAPM perspective as well as from a (2) Markowitzperspective assuming two asset classes (bonds, stocks). Calculate return distributions based onmarket data for the asset classes and compare to your optimal portfolio. Explain the differencestheoretically(segmentedmarkets,i.e. CAPMassumptions do not apply).
Then (3) include PE, where, again, you take expected returns and risk from past data. Discuss yourcorrelation assumptions. (4) what happens to your funding level and future strategy if you staysuboptimally invested and produce only 3% for 5 years? Discuss implications and implicitassumptions.
Your report should read like a report by the CEO written for the board members that need to signoff on your strategy. The form of your report is up to you, but you need to convince them, elseyouareoutofyourjob.
Assessmentcriteria:
- depthof knowledgeandunderstandingofkeyconceptsandtheories
- demonstrateanabilitytoanalyzecriticallyandsynthesisrelevantinformationandtheory
- innovativeandcreativeapproachtotheanalysisofmaterial
- demonstrate an ability to engage in full professional and academic communication in writtenwork
Assessmentpresentationrequirements:
- depthof knowledgeandunderstandingofkeyconceptsandtheories
- demonstrateanabilitytoanalysecriticallyandsynthesisrelevantinformationandtheory
- innovativeandcreativeapproachtotheanalysisofmaterial
- demonstrate an ability to engage in full professional and academic communication in writtenwork
