...| Beta Management Company Case Report | | Full name: Student ID: Class Time: Lecturer's Name: | Table of Contents I.Case background 2 II.Sarah Wolfe 2 III.Background of California R.E.I.T. and Brown Group, Inc. 3 IV.Return and risk 4 V.Summarize in bullet points what you learn from your case analysis. 7 VI.Appendix 8 I. Case background Who: Sarah Wolfe who is the founder and also the CEO of Beta Management Company Where: Small investment companies near a suburb of Boston When: The Beta Management Group was formed in 1988. Up to 1991, high-net-worth individual clients totaling $25 million in assets were under control by the Beta Management Group. What: She had been successful in the management of Beta’s funds by focusing on the Vanguard Index 500 Trust, even generating good returns in the worst of times. After doubling the size of Beta, she decided to pick some smaller stocks to go along with the index mutual fund. She also planned to increase the proportion of Beta’s assets in equities. II. Sarah Wolfe Strategy applied was to timing the market can be simply defined “buy low and sell high” to minimize the risk and enhance returns for clients since 1988. To get higher return by eliminating the risk was one of the good ways to add value for clients. Another strategy was to explore the range of market strategy. She has successfully adjusted the level of market exposures between 50% and 99%. The best way was chosen to maintain and adjust equity...
Words: 1935 - Pages: 8
...Beta Management Company | | |Investment Management case study | Table of contents Backgrounds……………………………………………………….……1 Strategies………………………………………………………………...1 Background of California R.E.I.T and Brown Group Inc……………2 Return and risk…………………………………………………….....…2 Summary………………………………………………………………...4 Appendix………………………………………………………………...5 Background: Beta Management Company is a small investment management company based in a Boston suburb founded in 1988. As the company developed, they had roughly 25 million dollars in the 1991. The goal of the company is to enhance returns but reduce risks for clients via market timing. Currently, the company’s funds were invested into the Vanguard 500, an S&P 500 no-load and low-expense index funds (with the reminder in money market instruments). As time goes by, Sarah Wolfe who is the founder of this company think about increasing her equity exposure to 80% with the purchase of individual stock. Strategies: Firstly, Sarah Wolfe uses a market timing strategy based on two portfolios: the Vanguard Index and money market. In order to obtain the capital gains, once the company predicts the market value will rise, it will transfer its assets from the money market to the Index. The limit will up to a maximum 99% of total assets. On the other hand when the company expects the market value will decrease, it...
Words: 1292 - Pages: 6
...Beta Management Group is a small investment management company based in Boston, which was founded by Ms. Sarah Wolfe (The founder and CEO of the Beta Management Group) in 1988. Ms. Wolfe follows a market timing investment strategy based on two portfolios; the Vanguard index and money market instruments. The goals of Beta Management were to enhance returns but reduce risks for clients via market timing. Ms. Wolfe would keep the vast majority of Beta’s funds in no-load, low-expense index funds; and, the rest of the money would go into money market instruments. Keeping the market exposure between 50% and 99%, she eventually established the limited use of Vanguard’s Index 500 Trust because it had a very low expense ratio and its success resembled the S&P 500 Index’s return. By January 4, 1991, Beta had 79.2% of its $25 million in assets ($19.8 million) invested in the Vanguard index fund. Wolfe had been quite successful in 1990. She had reduced Beta’s equity position to 50% in June, partially missing a large two-month market decline. The company’s success had brought in enough new money to double the size of Beta in under six months. But she had lost some potential new clients who had thought it unusual that Beta Management used only an index mutual fund and picked none of its own stocks. In order to solve the problem of losing potential client, it decided to add individual stocks to its equity portfolio for diversification and also for marketing purpose. She preferred to pick...
Words: 838 - Pages: 4
...1. What factors should Ameritrade’s management team consider when evaluating the proposed advertising program and technology upgrades? How significant are these factors from a risk perspective? Based on the case, we know the company Ameritrade Holding Corporation is a deep-discount brokerage, and the company’s proposed strategy is to increase the customer base by being a low-cost provider against its competitors. The company plans to invest more towards technology and advertising, and cut costs to improve the firm’s service, capacity, and customer awareness. If Ameritrade should go forward with this investment, it’s prudent to consider some factors. From a risk perspective the company should calculate the cost of capital as a basis for project evaluation. Ameritrade should also calculate the net present value (NPV) to determine the costs and benefits of the proposed investments. When calculating the NPV we should be aware of choosing the appropriate discount rate, which is the most important factor in the formula. Using too high or too low a discount rate can increase the uncertainty of future cash flows. Lastly, the company should also consider cash flows when evaluating the investment. If a company wants to start a new project or investment, cash will be the biggest determining factor. The CEO Joe Ricketts strongly believed his company can do this investment, however, his management team does not have enough confidence that they can get the higher expected return. Thus, at...
Words: 1084 - Pages: 5
...To: Janet Mortensen, CFO From: Senior Financial Analyst Division Date: October 7, 2013 Re: Midland Energy Resources Inc. Weighted Average Cost of Capital Midland Energy Resources Inc. is a publicly traded company that primarily deals in the energy industry. The company itself is divided into three major operational divisions, two of which that is concerning to the company include: Oil and Gas Exploration and Production (E&P) and Refining and Marketing (R&M). The Petrochemicals division will not be addressed. Going forward, Midland Energy would like to undertake various development projects and property acquisitions, and the profitability of such endeavors must be evaluated. To do so, both the single corporate and the two division WACCs must be calculated. Management team at Midland Energy Resources Inc. can determine which of the three appropriate WACC figures to be used for future company reports. In order to calculate Midland Energy Resources’ corporate WACC, the calculations are based on the formula below, where ������������ and ������������ are the cost of equity and debt respectively, D and E are the values of debt and equity respectively, V is the company’s enterprise value, and t is the tax rate. WACC estimates for the company as a whole and for each division are summarized in Table 1. How it is arrived at these figures is shown in the calculations in Appendix 1 and the decisions for each variable are explained below. ������ ������ ������������������������ = ������������...
Words: 2217 - Pages: 9
...25721 Investment Management BMC Case Study Student Name: Junwei Wang Student ID: 11516655 Class Time: 6 p.m. – 9 p.m. Tuesday Lecturer: Wing Bui Table of content Q 1. 1 Q 2. 1 Q 3. 2 Q 4. 2 Q 5. 3 Beta Management Company I. Case Background Beta Management Company was founded in 1988 by Ms. Wolfe. Beta Management Company is a small investment management company based in a Boston suburb. Beta Management Company was successful in 1989 and 1990. This success had brought in enough new money to double the size of the company. However, Ms. Wolfe had lost some potential new clients who had thought it unusual that Beta Management used only an index mutual fund and picked none of its own stocks. Sarah Wolfe was considering Beta’s new goal and directions for coming year. II. A. Ms. Wolfe decided to follow “ index” to adjust equity market exposure. This is a good strategy due to that at the beginning of the foundation of the company, the size of her account was small and there were no much money for her to take a risk. The strategy she followed was the lowest risky way. Ms. Wolfe kept a majority of Beta’s funds in no-load, low-expense index funds, adjusting the level of market exposure between 50% and 99% of Beta’s funds in...
Words: 886 - Pages: 4
...organizational culture? -The strength of an organizational culture lies in the beliefs, values and assumptions of an organization. When an organization has a strong culture the company is defined as one that believes, across the board, the values and beliefs of the company. Many organizations have sub-cultures that will ‘buck’ the system, but when the company is defined as having a strong culture, even the sub-cultures are in line with the company values and beliefs. Where the problems may arise is organizations that are so embedded in their belief and value systems that they may not be open to changing times in the market, organizational changes, or human resource changes. The organizations may be missing out on new ideas from new employees because they are too busy trying to conform employees into their total way of thinking. I believe there is room for learning the corporate culture, especially if that culture is working but I also believe there is always room for change and improvement in the organizations culture too. 8. Acme Corp. is planning to acquire Beta Corp., which operates in a different industry. Acme’s culture is entrepreneurial and fast-paced, whereas Beta employees value slow, deliberate decision making by consensus. Which merger strategy would you recommend to minimize culture shock when Acme acquires Beta? Explain your answer. -“Mergers have a substantial disruptive effect on the organizations involved, often leading to neglected strategy, employee stress, and customer...
Words: 1060 - Pages: 5
...This memo identifies the key issues that will need further investigations. Each of the following sections would identify one key issue, explain how the issue would affect impairment test, and summarize the sensitivity analysis conducted. Customer Retention Assumptions Customer retention/attrition is estimated by the Company to arrive at the adjusted revenue, however, no support is provided for the 75% of probability of retention.(Exhibit XI) Retention rate can be expected by conducting statistical analysis of historical customer turnover and revenue growth rates. When historical customer data of sufficient quality is not available, it may be necessary to rely on management estimates or industry data. Probability of retention is important because it will have a huge impact on customer value and goodwill impairment. The following table will illustrate how different retention rates can affect goodwill impairment. For the next step, we will ask management for historical customer attrition data or other support to confirm the accuracy of the 75% retention rate assumed. Retention Rate | Customer Relationship value | Goodwill | Goodwill Impairment | 65% | 21 | 27 | 130 | 70% | 24 | 24 | 133 | 75% | 28 | 20 | 137 | 80% | 32 | 16 | 141 | 85% | 37 | 11 | 146 | Discount Rate Assumptions Appraisal Professionals LLC, used the Capital Asset Pricing Model to compute a Weighted Average Cost of Capital for discounting the cash flows of MMN Builders. In order to do...
Words: 954 - Pages: 4
...AG is a worldwide company, which headquarter is located in Düsseldorf, Germany. Since 1876, holds a well-known leading market positions in both industrial and consumer businesses. It employs around 47,000 people, from at least 6 different areas worldwide. The company has brands and technologies which focused in three globally operating areas: Laundry & Home Care, Beauty Care and Adhesive technologies (Henkel AG & Co. KGaA, 2012). From 2012 their sales values has recorded 3.410 million euros, gross profit of 1.073 million euros and a net income which had a major increase from 32 million euros made in 2011 to 591 million euros en 2012, following (Henkel AG & Co. KGaA, 2012). Fortunately, with a constant increase that the company have been having from its current assets, potential investor might be tempted to follow from close the progress of Henkel. This essay is also gives Henkel AG a much closer look of some of the financial values of the company in order to explain its progress to help having a better perspective of how are the performance management being a support for its evolution to incentive even more current and potential investors. Table of content Introduction 4 Cost of Equity 5 Market Beta 7 Cost of Debt 14 Weighted Average Cost of Capital (WACC) 17 Conclusion 18 References 19 Appendix 21 Introduction Due to the current economic status quo of business markets worldwide, many companies have lost their “feet”...
Words: 4435 - Pages: 18
...pROJECT ON FINANCIAL MANAGEMENT | ESTIMATION OF BETA AND ITS INTERPRETATION IN AN INVESTMENT DECISION | Submitted to: | Prof. S P Mohapatra | | | Submitted By: Aditya Prakash (11DM061) Amitava Mitra (11DM062) Paritosh Beuria (11DM063) Subhajyoti Bhattacharya (11DM064) INSTITUTE OF MANAGEMENT & INFORMATION SCIENCE, BHUBANESWAR. | CONTENTS Page No. * OBJECTIVES 3 * COMPANY PROFILES 4 i. Mahindra Finance ii. Unitech Ltd. * PROJECT METHODOLOGY AND ANALYSIS 5 * Objectives of the project * Scope of the project * Concepts * Excel Analysis * Computational Aspects * INTERPRETATION AND CONCLUSION 11 * REFERENCES 11 OBJECTIVES * To select the stocks of two companies from different sectors to invest. * To determine the beta value for each of the stocks for last financial year on the basis of National Stock Exchange (NSE) and interpretation of beta. * To determine a minimum risk portfolio by using the two stocks. Company Profiles Mahindra Finance Mahindra & Mahindra Financial Services Limited is one of the leading non-banking finance companies in India. It is among the top 500 Indian companies by market capitalization. For the fiscal ended 31 March 2011...
Words: 743 - Pages: 3
...MCI Communications Corp. BACKGROUND MCI Communications Corp., a long distance telecommunications company, had been a sluggish performer in a buoyant market, and the management sensed a growing restlessness on the part of shareholders. To enhance the shareholders’ value, the company planned to repurchase some of its outstanding common stock. To guide the management in its decision, the company sought the advice of Lynch Investments in establishing a program to repurchase some of its outstanding common stocks. This leads to Katzu Mizuno, an associate of Lynch Investments, to investigate what source of fund is appropriate for the repurchase program and the possible effect of such action in the company. CASE ANALYSIS This case analysis aims to answer the following problem: How should the company finance its plan to repurchase its outstanding common stock in order to enhance its shareholder value? The company will be less flexible if it would have a debt-equity ratio of 72%. But since the said D/E ratio would “still be moderate with respect to the industry”, MCI’s bond rating won’t go below a medium grade of BBB. MCI needs to unlevered and then re-lever the target company’s equity beta. Unlevering the target’s equity beta yields an estimated beta comparable to the other major competitors which have different debt structure (see Exhibit B). Thus, re-levering this equity beta to reflect MCI’s target capital structure yields the appropriate risk for MCI to use in estimating a cost...
Words: 861 - Pages: 4
...acquiring company makes a bid for an acquire. If the target company is publicly traded, the acquiring company will make an offer for the outstanding shares. There are three types of takeovers: 1.1 Friendly takeovers A "friendly takeover" is an acquisition which is approved by the management. Before a bidder makes an offer for another company, it usually first informs the company's board of directors. In an ideal world, if the board feels that accepting the offer serves the shareholders better than rejecting it, it recommends the offer be accepted by the shareholders. 1.2 Hostile takeovers A "hostile takeover" allows a suitor to take over a target company whose management is unwilling to agree to a merger or takeover. A takeover is considered "hostile" if the target company's board rejects the offer, but the bidder continues to pursue it, or the bidder makes the offer directly after having announced its firm intention to make an offer. A hostile takeover can be conducted in several ways. A tender offer can be made where the acquiring company makes a public offer at a fixed price above the current market price. An acquiring company can also engage in a proxy fight, whereby it tries to persuade enough shareholders, usually asimple majority, to replace the management with a new one which will approve the takeover. Another method involves quietly purchasing enough stock on the open market, known as a "creeping tender offer", to effect a change in management....
Words: 2649 - Pages: 11
...industry. The company is mainly concentrated along two lines of business, the first being Telecommunication services and the second being Products and Systems (P&S) Segment. Telecommunication services accounted for 75% of the market value of the assets and the other 25% was occupied by P&S, however the ROC for the year 2004 for P&S is greater than Telecommunication services with a noticeable difference of 1.9%. The Current Book Value of Net Assets is$ 16 billion – 11.4 to Telecommunication, 4.6 to P&S. The Telecommunications Services segment currently has 7 million customers mainly belonging to the Southwest and Midwest and is considered as the dominant service providers of consumer satisfaction and product quality. It also has its revenues growing at an average rate of 3% (2000-2004). Its 2004 figures indicated a NOPAT of 1.18 billion, Net Assets: 11.4 Billion, Revenues: 11 Billion. Its Capital Budget is between 1.5 and 2 billion every year for 10 years and there is No tax rate relief for capital investments. Some factors that are playing to the advantage of this segment include Teletech expanding via acquisitions in Latin America, an overall deregulation of the industry and aggressive investment into new technology of digital switches and optical fiber cables. Nevertheless, a further growth in this segment seems challenging as the profit margins had been under pressure for several years. Also, another major obstruction is that other companies have progressed...
Words: 5809 - Pages: 24
...Case 90 Cost of Capital Directed FO R Northern Forest Products (NFP) was established in the 1800s to log timber in the Great North Woods. In response to changing conditions, the company underwent radical changes in the way it operates and currently it is a large multidivisional corporation. The major focus of the company remains managing over one million acres of timber production and overseeing the manufacture of consumer paper products from pulp derived from its land holdings. Over the years the company has diversified into several other related businesses, such as a moderately sized mill that produces paneling and wood flooring. This operation has developed a consistent outlet for all of its output and therefore is stable. The company is also involved in real estate as a result of developing some of the prime lake front properties from its forestlands for residential and private recreational use. Successful property development during the 1970s resulted in expanded real estate holdings. However, residential development was particularly hard hit during a recent economic downturn, and the company struggles in this area. NFP is aware of the increasing international demand for wood products and is concerned about recent environmental pressures concerning logging. The company believes that diversification strengthens its overall economic health and, therefore, recently acquired a plastics firm specializing in a high quality flooring product that looks like natural...
Words: 3896 - Pages: 16
...Case 90 Cost of Capital Directed FO R Northern Forest Products (NFP) was established in the 1800s to log timber in the Great North Woods. In response to changing conditions, the company underwent radical changes in the way it operates and currently it is a large multidivisional corporation. The major focus of the company remains managing over one million acres of timber production and overseeing the manufacture of consumer paper products from pulp derived from its land holdings. Over the years the company has diversified into several other related businesses, such as a moderately sized mill that produces paneling and wood flooring. This operation has developed a consistent outlet for all of its output and therefore is stable. The company is also involved in real estate as a result of developing some of the prime lake front properties from its forestlands for residential and private recreational use. Successful property development during the 1970s resulted in expanded real estate holdings. However, residential development was particularly hard hit during a recent economic downturn, and the company struggles in this area. NFP is aware of the increasing international demand for wood products and is concerned about recent environmental pressures concerning logging. The company believes that diversification strengthens its overall economic health and, therefore, recently acquired a plastics firm specializing in a high quality flooring product that looks like natural...
Words: 3896 - Pages: 16
