Cases in Investments and Financial Engineering - Zeus Asset Management

Cases in Investments and Financial Engineering

“Zeus Asset Management”

Investment philosophy

As a private asset management company, Zeus is well known for building the relationship-oriented clients service that employees are dedicated to pursuing and managing the client's’ investment objectives and portfolios. All Zeus investment professionals have had been through at least three recessions and had an average of 18 years of investment experience. Zeus believes that by using conservative, risk-averse, quality oriented approach to investment management, the company can achieve superior investment results. With all these seasoned veterans and experience they have, Zeus is able to pick the best securities for clients and significantly reduce the probability of risk seeking activities.

Zeus is also different from most of the asset management company in general, which are more focusing on high return in short term. Instead, Zeus believes in using safer approach and seeking long term growth can generate better results. This can be proved by the strategic asset allocations they made, which are not short term, market-time moves.

Lastly, Zeus has a very large clients base with variety of requirement for their portfolio. Zeus would screen their clients’ investment habits and satisfy them by achieving their objectives. For example, a Pepsi executive will have legal constraints as to what is bought and sold in his/her portfolio. In addition, he/she may not invest money in her company if the annual bonus depends on annual sales of soft drinks. Another example is that clients with different level of tax-bracket want different types of securities. Zeus will consider all different types of special needs their clients have and help them to choose the best securities and provide the best return to them in their own circumstances.

Zeus’s primary investors

There are two types of Zeus’s primary investors, individual and institution. Individual investors are typically risk-averse and high net worth. For the clients that meet the $2 million minimum requirement, Zeus customized their individual portfolios according to their risk and return preferences. For the clients that don’t meet the minimum requirement of $2 million, Zeus invests their money in one or more than one mutual funds. The institutional assets are made up by endowments, insurance companies and corporations.

The Advantage and Disadvantage of Investment Process

Zeus as a successful investment company has a great investment process and strategy. In the case, Zeus shows a clear investment objective for the equity fund that seeking long-term growth of capital through investment in a high-quality portfolio of stock. For the equity fund investment process, Zeus first evaluates 2000 stocks’ quality, capitalization, and liquidity. They compare companies establish earning to the universe and eliminate possible negative effect for stock. After deciding a list, they will begin a due diligence to find satisfying targets. The first advantage this investment process is comprehensive find out target stock and almost impossible miss good stocks. The second advantage is Zeus pick long-term growth stock will reduce portfolio risk and make investor capital more safety. The third advantage for investment process is due diligence. It will give Zeus more detail information about target public company and eliminate the uncertain effect. This strategy also has some disadvantage. First, focus on long-term growth stock also means a lower return than the risky stock and cannot sufficiently diversified portfolio risk. From Table, Zeus company’s annual return is lower than S&P Index. A similar disadvantage also has in the bund fund, Zeus only invests in AA or higher quality rating bund. The second disadvantage is due diligence problem. Due diligence is good for investment, however, will result in more cost for company operation and cannot sure investigation process is impartial.