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Templeton Growth Fund

Erlangga Nugrahabharata Eileen Chu. Templeton Growth Fund. Templeton Growth Fund facts: Introduced in November 1954 Goal: LT capital appreciation in global equities Average return : 12.55% since inception The last 10 years: 3.66%. Case background. Determine Optimal Portfolio (OP)

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Templeton Growth Fund

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  1. ErlanggaNugrahabharata Eileen Chu Templeton Growth Fund

  2. Templeton Growth Fund facts: • Introduced in November 1954 • Goal: LT capital appreciation in global equities • Average return : 12.55% since inception • The last 10 years: 3.66% Case background

  3. Determine Optimal Portfolio (OP) Identifying countries and weights Measure performance Determine Optimal Constrained Portfolio (OCP) With Floor and Cap Case OBjective

  4. Summary measures for Templeton- for the year of 2009 • rtemp: 8.82 % • βtemp: . 98 • RVOLtemp: .0886 Calculating Templeton return, β, RVOL *rf2009: .0015

  5. Calculate RVOL for individual countries (RVOLi) Rank countries based on RVOLi Calculate C* as the cutoff point Calculate each countries weights in OP Calculate OP performance Construct Optimal portfolio (op)

  6. 1. Calculating RVOL for each country

  7. 2. Rank RVOL

  8. 2. RVOL RANKS (CONT.)

  9. C*=CJapan= 0.09594 3.Calculate C* and determine the Optimal Portfolio in markets for which RVOLi>C*.

  10. 4. Calculate the weight of the Optimal Portfolio

  11. 5. Calculate the performance of OP • Summary measures for Optimal Portfolio (OP) • rop: 15.94% • βop: . 98 • RVOLop: .1380

  12. OCPANGGA OCPCHU Calculate ocp

  13. Maximize floor for US Apply cap 6.5% to RVOL-ranked countries up to US Ocpangga

  14. Floor 35% for US Apply cap 6.5% to RVOL-ranked countries up to Japan International Diversification (keep all countries in the portfolio) An Art not Science OCP chu

  15. Calculate the performance of OCPCHU • Summary measures for Optimal Portfolio (OP) • rohu: 10.93% • βchu: 1.0316 • RVOLchu: .1380

  16. Compare the performance 2009

  17. Gather 2010 data www.msci.com/products/indices/country_and_regional/all_country/performance.html Run the out of sample calculation for each country’s return, beta Use the same weight of 2009 Calculate the portfolio performance (Templeton, OP, OCP, USA & World) Compare 2010 performace of portfolios

  18. Calculate 2010 monthly return for each portfolio country

  19. Calculate 2010 out of sample return, βeta for all portfolio countries (annualized)

  20. Calculate the 2010 performance of Templeton • Summary measures for Optimal Portfolio • rtemp: 8.87% • βtemp: 1.0244 • RVOLtemp: .0853

  21. Calculate the performance of Opwith 2010 data • Summary measures for Optimal Portfolio • rop: 15.93% • βop: 1.1636 • RVOLop: .1357

  22. Calculate the performance of OCPchu with 2010 data • Summary measures for Optimal Portfolio • rchu: 11.06% • βchu: 1.0695 • RVOLchu: .1022

  23. Calculate the performance of OCP angga with 2010 data • Summary measures for Optimal Portfolio • rangga: 11.39% • βangga: 1.0654 • RVOLangga: .1057

  24. Compare the performance 2010

  25. Op performs the best. XVII Compare the performance 2009, 2010

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