This note provides an overview of asset management and capital markets, the different types of firms in this industry, types of investments, the different investment styles and strategies employed by asset managers to help them achieve their goals, and asset manager roles and responsibilities.
This note provides an overview of asset management and capital markets, the different types of firms in this industry, types of investments, the different investment styles and strategies employed by asset managers to help them achieve their goals, and asset manager roles and responsibilities.
In July 2022, a portfolio manager for an investment company was considering adding the Coca-Cola Company (Coca-Cola) stock to its flagship global blend fund, which invested in firms with neither predominant value nor growth characteristics. Her initial task was to develop an investment thesis by first gathering qualitative and quantitative information related to Coca-Cola and its peers. Her thesis would consider what long-term trends might play out in the industry, as well as any short- and medium-term considerations related to the economy, the industry, and Coca-Cola itself. She wondered whether an analysis of recent financial performance coupled with expectations of future performance could provide any clues as to the suitability of current investments. Recognizing that further analysis would follow (such as an in-depth discounted cash flow analysis), the portfolio manager needed to know whether the fund should consider investing in Coca-Cola’s stock based on her preliminary analysis.
In July 2022, a portfolio manager for an investment company was considering adding the Coca-Cola Company (Coca-Cola) stock to its flagship global blend fund, which invested in firms with neither predominant value nor growth characteristics. Her initial task was to develop an investment thesis by first gathering qualitative and quantitative information related to Coca-Cola and its peers. Her thesis would consider what long-term trends might play out in the industry, as well as any short- and medium-term considerations related to the economy, the industry, and Coca-Cola itself. She wondered whether an analysis of recent financial performance coupled with expectations of future performance could provide any clues as to the suitability of current investments. Recognizing that further analysis would follow (such as an in-depth discounted cash flow analysis), the portfolio manager needed to know whether the fund should consider investing in Coca-Cola's stock based on her preliminary analysis.
On January 12, 2020, Michael McCain, the president and chief executive officer (CEO) of Maple Leaf Foods Inc., posted four tweets on the company's social media platform, venting his anger at the US administration over a civilian airplane shot down in Iran. Specifically, he expressed his anger at the loss of life—including that of the wife and 11-year-old son of an employee of Maple Leaf Foods—which, according to McCain, stemmed from “a needless, irresponsible series of events in Iran. McCain cast blame on US president Donald Trump for escalating tensions with an ill-conceived plan to divert focus from political woes. Should McCain, as CEO, have expressed his personal views on Maple Leaf Foods' Twitter feed? Would his tweets damage the company's brand and destroy shareholder value?
On January 12, 2020, Michael McCain, the president and chief executive officer (CEO) of Maple Leaf Foods Inc., posted four tweets on the company's social media platform, venting his anger at the US administration over a civilian airplane shot down in Iran. Specifically, he expressed his anger at the loss of life-including that of the wife and 11-year-old son of an employee of Maple Leaf Foods-which, according to McCain, stemmed from "a needless, irresponsible series of events in Iran." McCain cast blame on US president Donald Trump for escalating tensions with an "ill-conceived plan to divert focus from political woes." Should McCain, as CEO, have expressed his personal views on Maple Leaf Foods' Twitter feed? Would his tweets damage the company's brand and destroy shareholder value?
A portfolio manager at Century 23 Investment Company was considering whether to maintain holdings in The Walt Disney Company (Disney). She was reviewing the recently released fourth quarter and full fiscal year earnings report of Disney and comparing the results against those of key competitors, including Netflix Inc., Comcast Corporation, and Viacom Inc. She examined financial statements, ratios, valuation metrics, and financial forecasts, to find a potential connection between financial performance and stock prices. After considering the investment strategy adopted by her investment company—identifying and investing in stocks that showed consistent earnings growth above broad market levels while also trading at a reasonable price—the investment manager had to decide whether or not to maintain the holdings.
A portfolio manager at Century 23 Investment Company was considering whether to maintain holdings in The Walt Disney Company (Disney). She was reviewing the recently released fourth quarter and full fiscal year earnings report of Disney and comparing the results against those of key competitors, including Netflix Inc., Comcast Corporation, and Viacom Inc. She examined financial statements, ratios, valuation metrics, and financial forecasts, to find a potential connection between financial performance and stock prices. After considering the investment strategy adopted by her investment company-identifying and investing in stocks that showed consistent earnings growth above broad market levels while also trading at a reasonable price-the investment manager had to decide whether or not to maintain the holdings.
In March 2019, two senior managers attending an executive education program had been assigned the task of applying their learnings from readings in order to estimate the costs of capital for Walmart Inc. (Walmart). They also needed to discuss why the cost of capital was such an important topic. The managers had with them background information, including a recent Walmart balance sheet and income statement; a U.S. Department of Treasury yield curve; Walmart’s earnings, dividend, and stock price information; historical U.S. capital market returns; interest rates; and a detailed description of a long-term Walmart bond. Based on this information, the managers needed to estimate Walmart’s cost of capital and be sure they understood why this mattered.
In March 2019, two senior managers attending an executive education program had been assigned the task of applying their learnings from readings in order to estimate the costs of capital for Walmart Inc. (Walmart). They also needed to discuss why the cost of capital was such an important topic. The managers had with them background information, including a recent Walmart balance sheet and income statement; a U.S. Department of Treasury yield curve; Walmart's earnings, dividend, and stock price information; historical U.S. capital market returns; interest rates; and a detailed description of a long-term Walmart bond. Based on this information, the managers needed to estimate Walmart's cost of capital and be sure they understood why this mattered.