- Prospectus and Fund Objectives
Double-spaced, 1 page
It should include at least the name of the fund, objective, trading/investment strategy, style, and fund formation (investment process).
You are beginning your new job with Patriot Investment Strategies, a mutual fund family managing approximately $100 billion in assets.Patriot has a variety of funds with various objectives.You, as a group, have been assigned to manage a portfolio benchmarking an existing index and to create at least one new fund based on your interesting and reasonable ideas.Since Patriot has also hired several young bright newly graduates like you, the management of the company decides to initiate a mutual fund competition.However, the management has emphasized that although it is a tournament, the management is more interested in your ideas and how you present, execute, and evaluate them.Thus, the tasks you perform during the competition process are more critical in gaining respect in the company (so is your grade) than the final result you deliver. The result of the competition is of second order importance.
1). You, as mutual fund managers, will manage a stock fund.Thus, you can only invest in stocks.You are not allowed to invest in mutual funds, ETFs, or derivatives.One exception is that you can invest in bond funds if you intend to construct a â€œbalanced fundâ€.
2). You will manage $1 million dollars in one portfolio.Short selling and buying on margin are allowed.Remember that the current maximum (initial) margin is 50%.Thus, your allowable buying power is $2 million dollars!
3). When you place an order, you will be charged a commission fee of $9.95.Although you are allowed to re-balance your portfolios as frequently as you desire, bear in mind that transaction costs can add up and lower your performance.On the other hand, this is also a great opportunity to test any day-trading or active strategies you have in mind.
4). You can place different types of limit orders.However, by following the prudent man law and your corporate policy, you can only trade any stock with a price range of $1 to $5,000.
5). You will earn 0.5% (annual rate) on your cash balance.If you trade on margin, you will be charged 6.0% (annual rate) on the debt interest rate.Remember: no pain, no gain!
6). Important: Do NOT â€œresetâ€ or â€œquitâ€ your portfolios during the tournament period.