Investment Appraisal Assignment - 2 Example | Topics and Well Written Essays - 2500 words

Investment Appraisal - 2 - Assignment Example The money accumulated is then invested in various investments, so that it generates further income. It is made sure that the income generated is enough to payout the pension benefits provided to the employees. The management of the funds is not necessarily separate from the management of the company. Usually these managers have expertise in investment techniques, in order to maximize the return upon the investments made. The fund portfolio is evaluated as how much percentage is invested in each portfolio. Also, it is taken into consideration how the return from each investment is accounted to the performance, of the fund as a whole. Based on the performance of the funds the investment appraisal is carried out. Fund Investment The pension fund is the accumulated fund, collected from the employers and employees. The earnings that this fund generates is accumulated within itself. The fund is managed by professionals with expertise in the related field of investment. The funds are to be utilized in fulfilling the financial needs of the company, which it has to bear in terms of constructive liability. The constructive liability being, to pay pension and other after retirement benefits to the employees. Pension fund are the accumulation of funds that are invested in various investments, where the returns are generated. ... The current portfolio is invested diversely in four divisions of investments, namely, UK Equities, Overseas Equities, UK Gilts and UK Property. A mere 5% of assets also exist in the form of cash. A) Review of Current Portfolio In the current portfolio of the assets, UK equities have a weightage of 50% of the fund. The assets held by the funds should not lose value and should be able to provide a handsome amount of return. Based on the risks associated with the assets of the fund, the main cause of concern is whether the fund performance is persistent and increasing or not (Christopher, et al., 1998). The portfolio of the funds consists of 25% of UK gilts investment which are the least risky of all the investments and also provide the least return. The appropriation of the funds in the current portfolio elaborates that 5% of cash is held. With the total fund size amounting to ? 1billion, this amounts to ? 50 million. This is an asset that is not invested and is losing value over the t ime. The cash that is retained in the portfolio is not considered to be healthy. Other liquid assets, such as equity stock, can easily be traded in the market. It should be considered as it will benefit the fund. This is because it shall be providing a return, thus minimizing the impact of inflation and reduction in the value of money. The majority of the portfolio consists of UK security and amounts to the ? 500 million. This amount is invested in the equity stock of the companies listed in the stock exchanges in United Kingdom. The performance of the fund is mainly concerned with the amount of return and the rate of return that it provides accounting for the risk associated with it too (Chan, et al., 1995). The performance of