Thompson Asset Management Harvard Case Solution & Analysis

Thompson Asset Management Case Study Solution

The daily average return of Pro Index fund is 0.24 percent, which t is better than 0.08 percent of S&P 500, individual annual returns are 61 percent of Pro Index and 21 percent of SP 500. The performance is far better than the benchmark, but the returns come with some risks i.e. standard deviation of the returns. The daily standard deviation, which is known as the returns variability of Pro Index return is 1.9 percent and it is 1.2percent of S&P 500 returns. Whereas, annual standard deviations for Pro Index and S&P 500 are 30.3 percent and 19.5 percent respectively. The calculations are shown in Exhibit 1 of the document.

The sharp ratio Pro Value is near to 225 percent, indicating that it can generate 2.25 times more return than that taken risk per unit. This specifies that the stocks are performing very well for taking an extra risk, therefore it can be said that the premium return over risk is higher than the risk taken itself. This is in favor of the index that it is performing very well to the benchmark. The information ratio is 15.8745, which indicates that the portfolio manager has an efficiency of generating returns near to his benchmark. The calculations are shown in Exhibit 2 of the document.

Recommendations

As stated above, the alternative optimal investment plans for the university could be drawn by using various weights of investment in both the funds. On the basis of the risks and returns calculated in the previous sections, and by using alternative weights; an efficient frontier is created  in the Exhibit 1.

The efficient frontier shows various combinations of risks and returns. Thompson could let the university choose from the optimal alternative options, on the basis of its ability to pursue risk and willingness of gaining returns over their investment.

Conclusion

The expansion in the institutional sector is a great opportunity for the firm.An optimal plan for the university could lead to the success of the company into institutional sector as well. A deep valuation for investment in both of the funds is mandatory,in order to make the institutional asset management successful.............................

 

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