Equity R15

Question 1

Describe the role of equities in a porfolio

Answer 1

Capital appreciation, Dividend Income, Hedge Inflation, Diversification

Question 2

Describe how an equity managers universe can be segmented

Answer 2

Size (market caps) and Style (value, balanced, growth)

Geography (developed, emerging, frontier markets)

Sector/Industry

Combinations of the previous

Question 3

Types of income (and costs) in equity portfolios

Answer 3

Income:
Dividends

Securities Lending

Writing options (receiving premiums)

Dividend Capture (buying before and selling after ex-dividend)

Costs:
Strategy Costs - active higher fees, passive hidden fees like predatory pricing

Liquidity demands - high impact costs for momentum

Question 4

Benefits of shareholder engagement, and what roles a equity manager might play

Answer 4

Seek to influence the company to make change. Improves corporate governance, may benefit shareprice.

Activist investors - take this further and propose resolutions through proxy fights