Norris Capital Investment

Norris Capital Investment
Norris Capital is a UK fund which provides an investment vehicle for educational purposes (and therefore has charitable fund status). Members of the fund make regular financial contributions, with their aim being to achieve significant growth in value in order to finance an educational objective (e.g. a child’s school fees or university fees) after a given period. After a minimum period of five years, the contributors are eligible to begin withdrawing their funds. The fund was established in June 2008, therefore the first contributors will soon be eligible to begin withdrawing funds if they wish. Norris Capital faces competition from depositary institutions, mutual funds and others, in attracting inflows of funds from contributors.

As of 1st January 2013, the fund holds £13.5 million of assets. It currently has 35% in UK equities, 20% in overseas equities, 15% in UK corporate bonds, 20% in UK government bonds, and 10% in cash and short-term instruments. From June 2013, it forecasts that fund withdrawals (by members which have invested for at least five years) will exceed fund inflows (from new and existing contributors) by 3% per annum on average for the subsequent five years.
A suggested interpretation of this 3% figure is:
(cash outflows during year – cash inflows during year) / total assets at 1/1/2013 = 3%

The investments committee of this fund will meet on 5 April 2013 to discuss its future strategic asset allocation and tactical asset allocation ranges. You are required to prepare a report which will inform the committee on current issues in the investment environment, present alternatives for plausible strategic asset allocations, and deliver recommendations for the actions the fund should take. Your report should also consider to what extent the fund should use ‘active’ versus ‘passive’ investment approaches in the different asset classes.

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