Schindler Foundation Report
I have been asked to evaluate the performance of the Schindler Foundation fund, which has been in progress for the past five years. From my evaluation I have come to several conclusions about Lamb and McRae's management of the portfolio.
Firstly, I calculated the beta of the portfolio from the information that was given to me. The beta measures the portfolio market risk; it measures the sensitivity of the rates of return on a fund to general market movement. By definition the beta of the market is 1.00. A beta above one is more volatile than the overall market, while a beta below one is less volatile. I calculated it to be 1.11, which means that the price of the portfolio would be expected to rise or fall by 1.1%; when the overall market has increased or decreased by 1.0%. Hence the higher the beta, the greater the risk. In this situation; the beta of the portfolio is only 0.11% above the beta of the market, which indicates from this particular calculation that the portfolio has performed well. Even though when the market price falls by 1.0%; the portfolio will only fall by an extra 0.11% and when the market rises by 1.0%, the portfolio will rise by an extra 0.11%. However, conclusions cannot be drawn from this alone, so further analysis has to be made.
I calculated the total return of the portfolio over the five year period to be 2.93% and the annual average return to be 0.579% (the percentage profit a portfolio is making on a yearly basis). The total return on the market was calculated to be 23.53% and the annual average return to be 4.32%. From this it can clearly be seen that the portfolio has performed rather poorly under Lamb and McRae's ma ...