Readers will recall that in the Winter issue of Private Capital we launched our model portfolio game with four participating banks. The idea was to test how the private bankers fared with real life conditions.
We gave each of the banks $5 million to invest on the basis of a balanced portfolio - meaning the goal was to obtain a minimum investment return of 5%. We said that the portfolios could be rebalanced each quarter and that the game would last for two years.
Clearly these have not been easy times. However, all of the private banks have managed a positive performance, with CSPB leading in the first quarter, being overtaken by Dresdner in the second quarter, and returning to the lead in this quarter. It made a return in the last quarter alone of 9.4% and has returned an exceptional 18.35% since the game began.
Of the four banks, SG informed us that it did not want to trade the portfolio and retired from the game. However, we thought it would be of interest to see how a static portfolio performs (fewer trading costs) versus three active ones and so we continue to monitor the performance of the SG portfolio (even though SG is no longer managing it). We now call it the static portfolio.
To ensure fairness in the valuation of the portfolios we engaged another private bank to act as referee.
In the section that follows below ABN Amro, CSPB and Dresdner describe their strategies for the portfolios going forward and some of the changes they made in the last quarter. Simply click on the link below: