GLOBAL INTEGRATIVE PROJECT 2016 - DESIGNING A FUND

OVERVIEW

This document sets out a template to help you to organize how you use the time
on this project working on the analysis, design and rationale for your country
fund.

The product you will create if you follow this template will be a simplified version
of a real life fund but you will understand some of the basic principles of fund
design.

Each of the headings below translates into a task or tasks that you will need to
allocate.

ANALYSE THE MACRO-CONTEXT

To analyse the macro-environment a suggestion is to use PESTLE and/or similar

tools to provide a sophisticated analysis of the context of the country you have
been allocated. This section is probably the easiest in which to try to incorporate
academic theory (see document incorporating academic theory).

This is a kind of background and context to the fund design and it could be
anything up to around 40% of the report.

To divide up the analysis, you could allocate roles based on the different aspects
of Political Economic Socio-cultural Technical Legal Environmental, but remember
that they arent equally weighted because they arent of equivalent importance
in understanding fund design; it is a ratio more like:

P EL ST E
The ratio will vary country to country, but one way to think of this (if you were
simply allocating work in terms of the PESTLE analysis and nothing else) would
be for a group of 6 - to have 2 people on the Economy, 1 on P, 1 on S&T, 1 on
Legal and 1 on Environment. For a group of 5 you might have 2 people on the
Economy, 1 on P, 1 on S&T, and 1 on L&E

PICK HOLDINGS IN 4 SECTORS AND ALLOCATE RATIOS

Based on this analysis of the country, identify four sectors where you think there
are returns for investors (asking you to choose just four sectors is one way in
which this template is simplified because funds are usually more diversified than
this to spread risk). As Miles Davis, a famous jazz musician, once observed,
Dont play whats there, play whats not there. In other words, dont confine
yourself to the economic activities that are already extant in your country. Give
GLOBAL INTEGRATIVE PROJECT 2016 - DESIGNING A FUND

thought to new and innovative sectors that could, with the right investment, do
well. For example, changes in the global climate mean that new parts of the
world are evolving as successful grape growing and wine making areas. There
is also increasing scope for cross border infrastructural projects which have the
potential to unlock local dynamic economic potential. For example, cross border
high speed rail and freight lines. But do be mindful of the risks of changes in
government policy affecting such things as local corporate tax rates, currency
exchange rates, import controls and permits for incoming skilled labour where
local labour markets are lacking in key talents.

Allocate a percentage of your fund to each sector so it totals 100%. For example,
20% consumer discretionary, 30% oil and gas, 20% telecoms, 30% banking. It
would probably help to illustrate this with a graph eg:

You can represent this stage quite simply and quickly even though it will be
communicating quite a lot of information.

JUSTIFY YOUR CHOICE OF SECTORS AND THESE PERCENTAGES

Construct a reasoned argument for why you have chosen these sectors (this is a
complicated task and it really goes to the heart of the assessment), construct a
reasoned argument for why you have chosen those ratios (this is a more
straightforward task). In doing so try to think what would appeal to investors as
well as try to draw on relevant theory if possible. You could discuss risks/returns
in each sector, time horizons.

PICK ONE COMPANY IN EACH SECTOR AND JUSTIFY YOUR CHOICE

For each sector choose one company in which to invest (asking you to choose
just one company per sector is another way in which this template is simplified
because funds usually choose more than one company per sector again to
diversity and spread risk). Construct a reasoned argument for why you have
chosen these companies. Again think about investors and theoretical questions.
You should be able to refer to some theory on corporate governance or ethics in
this section.
GLOBAL INTEGRATIVE PROJECT 2016 - DESIGNING A FUND

CONCLUDE WITH DISCUSSION OF LIMITATIONS

Look back critically on what you have put together. Identify some potential
problems, threats, worst case scenarios, limiting assumptions, risks and so on.
Remember you arent presenting to investors, you are presenting to a Board of
Directors.

TIPS

Reports that will read better are the ones that do not just look as though they
comprise separate pieces of work that is done in silos and then stitched
together. There is an element of that because you will work individually when
conducting research, but the best reports should look like a coherent piece of
work, of even quality and flow.