Construction and management of a global macro fund - Essay Example

The market fluctuations affect returns on investments and make investors lack confidence on investments. Therefore, a well maintained portfolio is vital to every investor aiming to succeed and at the same time manage risks. As an investor, you need to know how to allocate assets that suits personal goals and strategies. This means that the selected portfolio should be in a position of meeting your future capital needs. Every investor’s goal is to maximize wealth; therefore this report focuses on construction and management of portfolio for a mutual fund.

The portfolio to be constructed should be the one with high returns and well diversified Portfolio analysis studies the performance of different portfolios under different circumstances (Angus, 2000). Portfolios can be grouped according to industries, countries or sector. Each group consists of sub-unit. For example, the financial sector can be made up of several banks or the Airline industry can be made up of several airline companies. The analysis of each portfolio helps an investor in making a decision when investing.

Most likely, a rational investor will choose the best portfolio and screen out the ones that are not essential based on objective criteria. A good portfolio is characterized by high returns on investment. Portfolio analysis requires subjective judgment as it is not easy to segment different industries. Portfolio analysis is a process as different financial instruments have to be evaluated one by one. The process is time consuming and involves a lot of effort. In spite of these odds, Markowitz the fonder of modern portfolio analysis has simplified the process by suggesting the use of expected return and variance.

In this report, we will discuss four steps of constructing a portfolio. Customers have different preferences and needs. Therefore, it is important to understand their expectations first. This entails ascertaining their financial