NBS8001 Project
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UK Investment Trust Analysis
On the 7th of July 2019 a wealthy investor is considering investing in one of three investment
trusts, with the intention of getting the best return over the following 12 months (up to July
2020).
The specific trusts in this study are JPMORGAN AMERICAN IT., WITAN INV.TRUST and MONKS
INV.TRUST and all are listed on the London Stock Exchange. The market is represented by the
FTSE All Share index.
The investor collects daily price data on these three investment trusts, going back to July 2014
and then conducts a performance analysis based on the Sharpe and Treynor ratios, and
Jensen’s alpha.
On the basis of the results the investor decides to buy shares in the top-performing
investment trust and ignores the other two.
Aim
Write a report which explains (a) the three trusts, (b) the three metrics, (c) the historic
performance up to (and including) 6th July 2019, and (d) the returns for the top-performing
trust over the remaining days up to (and including) 11th July 2020.
Structure
I. Executive Summary (approx. page overview of the report) (5%)
II. Overview of the trusts (descriptions of the trusts not analysis) (10%)
III. Description of the three metrics (Sharpe, Treynor, Jensen) (10%)
IV. Historic trust performance 2014-19: Apply the three metrics to the historic data for
2014-19, present the results in appropriate tables (graphs are a nice option but not
essential) and discuss your findings. (40%)
V. Analysis of actual returns 2019-20: Is the best fund during 2014-19 the best for 2019-
20 (30%)
VI. Conclusion (5%)
Assumptions
i. The FTSE All Share index (FTSEALLSHARE) is our proxy for the market
ii. The annual risk-free rate is 1% (giving a daily risk free rate of approx. 0.00274%)
across the whole test period. (Remember that this needs to be in decimal format
(0.0000274) if you calculated your fund returns as decimals, i.e. [(Pt – Pt – 1 )/Pt – 1]
Format
i. Word count: 1200 words (+/- 200 words) excluding executive summary, Tables,
appendices, and references.
ii. Font size: 11 or 12
iii. References: any recognised format (see academic articles)
iv. Line spacing: 1.5
Assessment weighting
This project is worth 20% of the module mark.
Deadline
21st February 2023 10am
Indicative grading guide
Grade Mark Indicative descriptor
Fail <40 Little evidence of
attempting all calculations
and explanations
Fail 40-49 Evidence of attempting all
parts but inadequate
calculations and/or
explanations
Pass 50-59 Main calculations and
explanations included but
little else
Merit 60-69 Main calculations linked
well to text; explanations
clear and well-developed
Distinction 70-79 Main calculations with some
additional elements, linked
to text; explanations clear
and well-developed and
including evidence of
additional reading
Distinction 80-89 Main calculations with
major additional elements,
linked to text; explanations
clear and well-developed
and including significant
evidence of additional
reading
Distinction 90-100 The same standard as a
professional investment
analyst’s report and/or
employing outstanding
academic developments in
the field
Appendix
To run regressions in Excel
1. Activate ToolPack
a. File – Options – Add-Ins – select Analysis ToolPak and choose Excel Add-ins
from ‘Manage’ menu – click ‘OK’.
b. If this is successful, when you click on Data from the top menu you should be
able to see ‘Data Analysis’ button in top right-hand corner.
2. Doing the regression analysis
a. Data –> Data Analysis –> Regression then OK – Input Y Range (select cells
with the Y variable, i.e. dependent variable) – Input X Range (select cells with
the X variable, i.e. independent variable) – then OK
3. Descriptive Statistics
a. Data –> Data Analysis –> Descriptive Statistics
b. These can give you: mean, max, min, standard deviation