PORTFOLIO WEALTH MANAGEMENT CASE : BANK XYZ
FINAL PROJECT
By Prisca Okke Puriana 19007030
Undergraduate Program School of Business and Management Institut Teknologi Bandung
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VALIDATION PAGE
PORTFOLIO WEALTH MANAGEMENT CASE : BANK XYZ
By PRISCA OKKE PURIANA ID No: 19007030
Undergraduate Program School of Business and Management Institut Teknologi Bandung
Validated By
____________________________ Deddy P. Koesrindartoto Ph.D NIP 132327713
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ABSTRACT Bank XYZ is one of the country’s largest commercial banks by assets. The bank serves consumers and businesses through more than 900 offices all around Indonesia. Nowadays, wealth management becomes new trend in banking sector. One of the core businesses of wealth management Bank XYZ is expanding investment of the customers. Several investment products are offered by wealth management of Bank XYZ, However, the problems come from the fluctuating market performance, which causes potential loss for the investors. One of the strategies to minimize loss because of fluctuating market performance is having portfolio assets. Portfolio asset is combination from several assets to minimize loss of fluctuating market performance. Portfolio can reduce risk, but it does not eliminate risk completely. There are two types of portfolio assets, which are portfolio with positive correlation of coefficient and portfolio with negative correlation coefficient, which is the best one. Portfolio with negative correlation of coefficient where an asset goes down, the other assets goes up. Therefore, by having negative correlation of coefficient portfolio asset, the investors’ loss is less than having only single asset. Moreover, the selection in choosing investment products should consider about investors’ risk profile, expected return, and time horizon. The criteria of investment products should be suitable with investors’ requirements. In this internship report, every investment products’ performance will be analyzed by calculating expected return and potential risk. The calculation of expected return and potential risk come historical data about its price and rate of return. Each investment products will plotted to Risk and Return Mapping in order to classified the products based on risk and return. Each group classification is divided into three time-horizon categories, which are short-term (1-3 years), medium-term (3-5 years), and long-term (more than 5 years). In conclusion, investment products are categorized based on return, standard deviation (risk), and time horizon.
Keywords : wealth management, portfolio asset management, efficient frontier, Markowitz theory
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ABSTRAKSI Bank XYZ merupakan salah satu bank terbesar di Indonesia yang melayani konsumen dan bisnis melalui lebih dari 900 kantor cabang di seluruh Indonesia. Saat ini, wealth management menjadi sebuah tren baru dalam sektor perbankan yang mendukung kinerja dari inti bisnis dalam perbankan. Terdapat beberapa produk investasi yang ditawarkan oleh wealth management dari Bank XYZ, Namun, hambatan datang dari kinerja pasar yang berfluktuasi, sehingga memperbesar potensi kerugian bagi investor. Salah satu strategi untuk meminimalisasi kerugian akibat fluktuasi kinerja pasar dengan mengimplementasi teori aset portofolio. Portofolio aset merupakan kombinasi dari beberapa aset yang berguna untuk meminimalisasi kerugian akibat kondisi pasar yang fluktuatif. Portofolio dapat digunakan untuk mengurangi risiko, tetapi tidak dapat menghilangkan risiko sepenuhnya. Ada dua jenis korelasi yang dapat dihasilkan dari implementasi aset portofolio yaitu portofolio dengan koefisien korelasi positif dan portofolio dengan koefisien korelasi negatif. Portofolio dengan korelasi negatif dapat mengurangi resiko karena ketika satu asset mengalami penurunan, maka aset lainnya diharapkan mengalami kenaikan. Oleh karena itu, dengan memiliki korelasi negatif dari koefisien portofolio aset, kerugian investor dapat diminimalisasi daripada para investor yang hanya memiliki aset tunggal. Selain itu, pilihan dalam memilih produk investasi harus mempertimbangkan tentang profil risiko investor, hasil yang diharapkan, dan jangka waktu. Kriteria produk investasi harus sesuai dengan karakteristik investor. Dalam penelitian ini, kinerja produk investasi setiap bulan akan dianalisa dengan menghitung hasil yang diharapkan dan potensial resiko. Perhitungan hasil yang diharapkan dan potensial risiko diolah berdasarkan data historis tentang harga asset dalam tiga tahun terakhir. Setiap produk investasi akan dipetakan dengan sumbu-x sebagai resiko dan sumbu-y sebagai hasil sehingga akan didapat sembilan kuadran yang mana setiap kuadran akan diklasifikasikan kembali menjadi tiga kategori kelompok waktu yaitu jangka pendek (1-3 tahun), jangka menengah (3-5 tahun), dan jangka panjang (lebih dari 5 tahun). Kesimpulannya, produk investasi dikelompokkan berdasarkan return, resiko dan waktu.
Kata kunci : manajemen asset kekayaan, asset portfolio manajemen, efficient frontier, teori Markowitz
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FOREWORD
Alhamdulillah, the author delivers the deepest thankfulness to Allah SWT because of his power and blessing, the author can finish this final project with title “Portfolio Wealth Management, Case : Bank XYZ” as the requirement from School of Business and Management ITB. During the process of accomplishing the final project, there are many people who give help, support and contribution for the author. Therefore, the author would like to say thank and give honor to several people 1. Mr. Deddy P. Koesrindartoto Ph.D as the academic counselor, thank you for helping the author with his suggestion, knowledge, patience, and guidance during the process of accomplishing the final project until the author arrives to the graduation. 2. My family for the unstoppable prays, support, and love during this time. Bapak and Ibu who always give the best in everything and become the loyal supporter for every step that the author taken. Proudly present this S.Mn for them. Dek Dimas and Dek Dea who are sometimes very annoying, but they were very helpful during the process of making the final project. 3. My cindils, Mila Rachmania, Nabilla Ayumi, Rany Wahyu Larasati and Astari Sirila Sakanti for our good times, laugh, and stupidity. Thank you for showing the author the true meaning of friendship. 4. Bank XYZ Regional Office Bandung for giving me internship opportunity, which award the author with wealth management understanding to be analyzed in the final project. 5. Adimulya Nurrahman for supporting the author in the lowest point, becoming daily reminder for the writer to accomplish the final project, and being good listener in every complaint. Also, bunches of thank you for Rininta Dwi Septiani and other friends in HIMATIKA whom were being so busy to teach me in using Mathlab software at that night. ix
6. All friends in SBM ITB, thank you for the good times, friendship, and experience during these last three years. We have grown and learn many things together, buddies! 7. All SBM lectures and administration staff for every helps during the last there years. Kak Danial from Comlabs ITB for the patience in torturing me to use Mathlab software. And also, other parties whom cannot mention one by one. The author realizes that this final project is not perfect and still has lack of weaknesses. Therefore, the author would be happy to receive any feedback and suggestion due to get the best result in this report. Finally, the author hopes this report can be useful, especially can be implemented in Bank XYZ. Bandung, July 2010
Prisca Okke Puriana
LIST OF CONTENTS
VALIDATION PAGE ……..………………………………………………………….…. iii ABSTRACT …………………………………………………………………………….. v ABSTRAKSI …………………………………………………………………………….. vii FOREWORD …………………………………………………………………………….. ix LIST OF CONTENTS
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LIST OF FIGURES …………………………………………………………………….. xiii LIST OF TABLES
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LIST OF EQUATION
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LIST OF APPENDICES
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CHAPTER I ……………………………………………………………………………… 1 INTRODUCTION………………………………………………………………………… 1 1.1 Background …………………………………………………………….. 1.2 Problem Identification …………………………………………………….. 1.3 Objectives …………………………………………………………….. 1.4 Problem Limitation …………………………………………………….. 1.5 Systematic of Writing …………………………………………………………
1 2 3 4 4
CHAPTER II …………………………………………………………………………….
7
LITERATURE STUDY……..……...………………………………………………….....
7
2.1 Wealth Management …………………………………………………………. 2.2 Investment ……………………………………………………………………. 2.3 Portfolio Asset ……………………………………………………………. 2.4 Markowitz Efficient Frontier Theory ……………………………………. 2.5 Measurement Portfolio Performance …………………………………….
7 8 10 11 12
CHAPTER III ……………………………………………………………………………. 15 METHODOLOGY
……………………………………………………………………. 15
3.1 Survey and Observation ……………………………………………………. 3.2 Research Objectives …… ……………………………………………………. 3.3 Literature Review ……………………………………………………………. 3.4 Data Collection ……………………………………………………………. 3.5 Data Analysis ……………………………………………………………. 3.6 Conclusion …………………………………………………………….
16 16 16 16 17 19
CHAPTER IV ……………………………………………………………………………. 21 xi
PROBLEM ANALYSIS
……………………………………………………………. 21
4.1 Problem Analysis ……………………………………………………………. 4.2 Improvement Proposal ……………………………………………………. 4.2.1 Feasible Area based on Return and Standard Deviation …………… 4.2.2 Feasible Area and Time Horizon …………………………………….
21 43 43 45
CHAPTER V ………………………………………………….…………………………. 55 CONCLUSION AND RECCOMENDATION
……………………………………. 55
5.1 Conclusion ……………………………………………………………. 55 5.2 Recommendation ……………………………………………………………. 56 REFERENCES APPENDIX
……………………………………………………………………. 58
……………………………………………………………………………. 59
LIST OF FIGURES
Figure 3.1 Research Methodology ……………………..………………………………… 15 Figure 4.1 Risk Return Mapping
…………………………………………………….. 40
Figure 4.2 Mean Efficient Frontier area A and D, short-term
…………………….. 45
Figure 4.3 Mean Efficient Frontier area A and D, medium and long-term ……………… 47 Figure 4.4 Mean Efficient Frontier area E, medium and long-term …………………….. 49 Figure 4.5 Mean Efficient Frontier area I, medium and long-term ……………………… 52
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LIST OF TABLES
Table 4.1 Deposito Bank XYZ …………………………………………………………………… 21 Table 4.2 Risk and Standard Deviation Money Market Mutual Fund ……………………. 24 Table 4.3 Risk and Standard Deviation Fixed Income Fund ……………………………… 29 Table 4.4 Risk and Standard Deviation Balanced Income Fund ………………………….. 34
Table 4.5 Risk and Standard Deviation Equity Fund …………………………………….. 38 Table 4.6 Table Area A (Low Return and Low Standard Deviation) ……………………. 41 Table 4.7 Table Area B (Low Return and Moderate Standard Deviation) ………………. 41 Table 4.8 Table Area C (Low Return and High Standard Deviation) …………………… 41 Table 4.9 Table Area D (Moderate Return and Low Standard Deviation) ……….……... 42 Table 4.10 Table Area E (Moderate Return and Moderate Standard Deviation) ………... 42 Table 4.11 Table Area H (High Return and Moderate Standard Deviation) ……………... 42 Table 4.12 Table Area I (High Return and High Standard Deviation) …………………... 43 Table 4.13 Table Area A and D (Low-to-moderate Return and Low Standard Deviation) 44 Table 4.14 Table Area E (Moderate Return and Moderate Standard Deviation …………. 44 Table 4.15 Table Area H and I (High Return and Moderate to High Standard Deviation).. 44 Table 4.16 Table Area A and D, Short-term …………………………………………….. 45 Table 4.17 Portfolio Area A and D, Short-term …………………………………………. 46 Table 4.18 Feasible Portfolio Area A and D, Short-Term ….…….……………………… 46 Table 4.19 Table Area A and D, Medium term ……………....…………………………. 47 Table 4.20 Portfolio Area A and D, Medium term ……………………………………… 48 Table 4.21 Feasible Portfolio Area A and D, Medium term ……………..……………… 49 Table 4.22 Table Area E, Medium and Long-term ……………………………………… 49 Table 4.23 Portfolio Area E, Medium and Long Term ………………………………….
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Table 4.24 Feasible Portfolio Area E, Medium and Long Term ….………………..…… 51 Table 4.25 Table Area H and I, Medium & Long-term …..……………………………..
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Table 4.26 Portfolio Area H and I, Medium and Long Term ...………….……………... 53 Table 4.27 Feasible Portfolio Area H and I, Medium and Long Term ….…...………..… 54
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LIST OF EQUATION Equation 2.1 Interest Deposit
……………………………………………………... 7
Equation 2.2 Rate of Return Mutual Fund
……………………………………………... 8
Equation 2.3 Maximizing Return
……………………………………………………... 12
Equation 2.4 Minimizing Return
……………………………………………………... 12
Equation 2.5 Expected Return
……………………………………………………... 13
Equation 2.6 Standard Deviation
……………………………………………………... 13
Equation 2.7 Portfolio Return
……………………………………………………... 13
Equation 2.8 Portfolio Risk ……………………………………………………………... 14 Equation 2.9 Covariance of Portfolio
……………………………………………... 14
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LIST OF APPENDICES APPENDIX A : MUTUAL FUND MONTHLY RETURN ………………………………………..59 APPENDIX B : QUESTIONNAIRE WEALTH MANAGEMENT ……………………………….60
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