THE ACADEMY OF FINANCIAL MARKETS WELCOME TO THE PRESENTATION! - PDF document

THE ACADEMY OF FINANCIAL MARKETS WELCOME TO THE PRESENTATION! Summary - Application � Overview � Client needs � Risk profile � FM overview � Solutions 1

Client needs � Funding Retail vs. Business � Investment Clients � Risk protection � Risk protection – Controls, derivatives , insurance, etc Risk Profile � Corporate � Individual (Ex 1) 2

FM Overview � Cash � Bonds � Property � Equity Individual Funding solution � Debt instruments 3

Individual Solution: Investments � Steps after needs analysis � Active vs. Passive � Active example (next slide) Bus Cycle ->Asset Allocation Phases of Econ Cycle 4

Bus Cycle ->Asset Allocation Interest rates phases over the Econ phases Bus Cycle ->Asset Allocation Equities allocation over phases 5

Bus Cycle ->Asset Allocation Cash allocation over phases Bus Cycle ->Asset Allocation Bonds allocation over phases 6

Bus Cycle ->Asset Allocation All Assets allocation over all phases Individual Solution: Investments � Active vs. Passive � Active example (prev. slide) � Passive guidelines � Ex 2 � Ex 5 � Rebalance for passive investors � Your behaviour more NB than those of your investments � Your view of the problem (volatility) is more NB than the problem � Protect yourself against yourself (greed & fear) � Emergence of BF 7

Individual Solution: Investments � BF = We are wired with character flaws � Overconfidence � Mental accounting � Loss aversion (Ex 6, 7) � Framing (Ex 8) � Gamblers’ fallacy (Ex 9) � Regret aversion Corporate Funding Solution A client approaches you to explain the pros and cons of funding his new business via: a) Shares (equity) in a CC Debt (loans, debentures, etc) b) Convertible debentures c) Combination of debt & equity d) Discuss the factors that must be considered to make each alternative viable. 8

Corporate Investment solution Sasol decides to invest its retained earnings in 1 of 3 alternatives: a) Standard Bank shares Gas-to-fuel plant in Qatar b) Buy back its own shares c) Discuss the factors that must be considered to make each alternative viable CIS Solution � UT Definition � Overview � Types 9

Unit Trusts � R-, A-, B-funds � Pricing � Break-even price � % Capital loss � How many units can you buy with R3000? � Value of unit trust investment (say 1200 units) � How many units needed to sell to get R3000? � Cheapest unit trust ito charges? � Other collective investments (e.g.ETFs, PUTs) 10