Deliverable 3 – Systemic Risk Client Presentation

ABC Capital Management is one of the most prestigious asset management companies in the country. It has been managing the wealth of America for over 100 years. It utilizes various forms of fundamental, technical, and quantitative analyses in the design and implementation of its several investment strategies and portfolios. Today, ABC Capital is a global investment management firm that continues to focus on rigorous research and the development of innovative, practical investment strategies. Because of this, ABC Capital is able to achieve the goals of its clients: individuals, pension funds, endowment funds, banks, insurance companies, foundations, and sovereign wealth funds.

You work as a junior portfolio manager with ABC Capital. ABC Capital has taken on a new potential client. The potential client is invested 100% in the S&P 500. You are asked to make a PowerPoint presentation to the client explaining the concept of systemic risk. The presentation will include:

  • Description of systemic risk. Include the equation, effect on return, and implications for the client’s investments.
  • Explanation of beta and the effects of volatility on returns.
  • A thorough overview of the concept of correlation.
  • Offer at least 3 techniques for mitigating risk and reducing beta. Explain how the techniques work.
  • Evaluate the pros and cons of each technique.