Case Study Beta Management
FIN7041: Investments Case Study 1- Beta Management Company
Tanya Mengyao Tang
Dylan William Sizemore
Gaebulwe Seretse
Business Purpose and Clients of Beta Management
The main business purpose of Beta Management is to “enhance returns but reduce risks for clients via market timing,” which is also one of their stated goals. Thus, Ms. Wofle aims to invest in the index during bull markets and exit from the index during bear markets. Ms. Wolfe, a market strategist, picked the name Beta Management to align to the company’s goal with its aim to “maintain and adjust equity market exposure” through the Vanguard’s Index 500 Trust and other potential stocks. The clients are generally high-net-worth individuals and small institutions.
Market Timing
Market timing means making investment decisions—mostly decisions of buying or selling financial assets—based on the prediction of the market price movements in the future. For example, if Ms. Wolfe predicts that the future market price will be declining, she will try to sell some of her Vanguard’s Index 500 Trust fund to avoid losses caused by the declination. In other word, she will try to reduce the portion of assets on Vanguard’s Index 500 Trust fund. If the prediction is right, Ms. Wolfe successfully avoids the decline of value of Vanguard’s Index 500 Trust fund. As a result, the value of the company’s assets was protected. On the other hand, if Ms. Wolfe predicts that the future market will be going up, she will try to buy more of Vanguard’s Index 500 Trust fund to capture a chance at increasing her assets’ value. If the prediction is right, the value of the company’s assets becomes higher. In this way, she can “add value” to her company’s assets. As we know from the description, Ms. Wolfe successfully predicted the market declination that will occur through June to September 1990. And successfully predict the market will climb back up after September 1990. Furthermore, she took action to her prediction and be able to add
Tanya Mengyao Tang
Dylan William Sizemore
Gaebulwe Seretse
Business Purpose and Clients of Beta Management
The main business purpose of Beta Management is to “enhance returns but reduce risks for clients via market timing,” which is also one of their stated goals. Thus, Ms. Wofle aims to invest in the index during bull markets and exit from the index during bear markets. Ms. Wolfe, a market strategist, picked the name Beta Management to align to the company’s goal with its aim to “maintain and adjust equity market exposure” through the Vanguard’s Index 500 Trust and other potential stocks. The clients are generally high-net-worth individuals and small institutions.
Market Timing
Market timing means making investment decisions—mostly decisions of buying or selling financial assets—based on the prediction of the market price movements in the future. For example, if Ms. Wolfe predicts that the future market price will be declining, she will try to sell some of her Vanguard’s Index 500 Trust fund to avoid losses caused by the declination. In other word, she will try to reduce the portion of assets on Vanguard’s Index 500 Trust fund. If the prediction is right, Ms. Wolfe successfully avoids the decline of value of Vanguard’s Index 500 Trust fund. As a result, the value of the company’s assets was protected. On the other hand, if Ms. Wolfe predicts that the future market will be going up, she will try to buy more of Vanguard’s Index 500 Trust fund to capture a chance at increasing her assets’ value. If the prediction is right, the value of the company’s assets becomes higher. In this way, she can “add value” to her company’s assets. As we know from the description, Ms. Wolfe successfully predicted the market declination that will occur through June to September 1990. And successfully predict the market will climb back up after September 1990. Furthermore, she took action to her prediction and be able to add