1. JESMOND MIZZI

2. Building the right portfolio to meet your investment objectives

3. Table of Contents Definition of Portfolio Management Investment Mandate Investment Goals and Objectives Investment Constraints Risk Tolerance Risk Profile Asset Classes Risk Return Trade-off Asset Allocation Optimal Portfolio Diversification Benefits Investing in Funds Portfolio Rebalancing 3

4. Portfolio management is the art and science of making decisions about investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions, and balancing risk against performance 4

5. INVESTMENT MANDATE  Investment Goals and Objectives  Investment Constraints  Risk Tolerance  Risk Profile  Optimal Portfolio 5

6. Investment Goals and Objectives Return on Capital Income Growth Balanced Level of Risk Willingness Ability 6

7. Financial Ability Liquidity Concerns Investment Horizon Personal Preferences 7 Investment Constraints

8. …what determines investor RISK TOLERANCE goes beyond the personality factors 8 Age Income Gender Education Number of Dependents Culture Research highlights that…

9. RISK PROFILE 9 RISK SEEKER RISK NEUTRAL RISK AVERSE

10. Asset Classes 10 CASH & CASH EQUIVALENTS Highly liquid Low Risk, Low Return FIXED INCOME Debt investment Interest Payment (Coupon) EQUITIES Ownership to a private or public company Dividend payment ALTERNATIVE INVESTMENTS Real Estate, Commodities The Building Blocks to Portfolio Construction

11. Risk Return Trade-off 11 the balance between the lowest possible risk and the highest possible return

12. Strategic Asset Allocation aligns the identified objectives and constraints with the long run market expectations to define the asset class weightings Tactical Asset Allocation Active portfolio management to gain from unexpected investment opportunities Asset Allocation 12

13. The Optimal Portfolio Investment Objectives Market Expectations Risk Tolerance 13 Conservative A risk-averse investor would be allocated a higher weighting to cash and money market instruments and investment grade bonds (IGB), with a lesser percentage in equity stocks Moderate An investor who falls between the two extremes would be allocated a balanced investment between equity and fixed income securities Aggressive A risk seeker with low liquidity requirements and a long term horizon is allocated a portfolio that is dominated by equity stocks

14. Diversification Benefits 14 Diversifying BETWEEN and ACROSS different Asset Classes and choosing assets with NON PERFECT CORRELATION lowers the SPECIFIC Risk Leaving the investor primarily exposed to MARKET Risk PORTFOLIO RISK SPECIFIC RISKMARKET RISK

15. Advantages:  Diversification  Lower transaction costs  Liquidity Investing in Funds 15 A Fund represents a pool of funds collected from different investors to be reinvested across different securities to yield a return

16. Portfolio Rebalancing 16 Portfolio management implies continuous asset allocation rebalancing in line with changes in investors’ circumstances and market conditions to ultimately achieve the investment objectives

17. Thank you 17