1.

0 Introduction
Larry J. Puglia managed the T.Rowe Price Blue Chip Growth Fund (Blue Chip Growth Fund) for over
23 years by the end of 2016. As one of the pioneers of this fund, Puglia has been the only fund
manager of this mutual fund since 1997, generating superior average returns over the fund's life for
his investors. The Blue Chip Growth Fund at its inception, in mid-1993 to 2016, had returned an
average annual total return of 10.12%, outperforming the 9.12% return of the fund’s benchmark, the
S&P 500. Morningstar, the investment community's well-known statistical service, gave the Blue
Chip Growth Fund its second-highest rating, four stars for overall results, putting it in the top 32.5
percent of 1,482 funds in its category.

1.1 How well has the Blue Chip Growth Fund performed in recent years?
From a statistical and historical performance standpoint, the Blue Chip Growth Fund has performed
extremely well in recent years. Appendix 1 illustrates that an investment of 10,000 USD on the 6 th of
June 2006 would have yielded a 241.51% return today (6th of June 2016), doubling its initial capital
and earning 40% additionally. On a shorter time frame, even a 3 year or 5 year comparison would still
earn an average of 14% returns.
Morningstar has placed the Blue Chip Growth Fund in the top 3% of 1,270 funds in its category when
compared to its 5 Year annual returns, which is its all-time high rating (Appendix 1). This shows how
prolific its performance is in recent years.
The trailing total returns have also increased in recent years, with its total returns ranging between
6.27% to 14.45% in a 3-year to 15-year comparison. The Blue Chip Growth Fund’s performance is
also reflected by its dividend distributions, whereby its “Distribution NAV” has gradually increased in
recent years (Appendix 2).

1.2 In making that assessment, what benchmark(s) are you using?

The first benchmark that was used was the performance of the Fund itself. On its 3-year to 5-year
performance, it has an average of 14% returns (Appendix 1). Also, an investment of $10,000 on the 6 th
of June 2006 generated more returns currently on the 6 th of June 2016 with $24,101.23, in comparison
with the Large Growth Fund that generated $19, 527.63 and the S&P 500 Total Returns which
generated $20,644.18 (Appendix 3).
Furthermore, Bruner, Robert F. et al, (2018) stated that Morningstar gave the Blue Chip Growth Fund
a 4 stars rating for overall performance, placing it in the top 32.5% of 1,482 funds in its category. The
funds are rated with at least a three-year history based on risk-adjusted return by subtracting a risk
penalty (as determined by the amount of variation in the fund’s monthly returns) from the fund’s load-
adjusted excess return (including the effects of transaction fees such as sales loads and redemption
fees) with emphasis on downward variations and consistent performance. Morningstar states that a
high rating could reflect above-average returns, below-average risk, or both.
In addition, when comparing the trailing total returns between the Fund, the S&P 500 Total Returns,
and the Large Growth Fund , the Blue Chip Growth Fund has difference of total returns ranging
between 0.74% to 2.84% in a 3-year to 15-year comparison with the S&P 500 Total Returns and
1.70% to 3.34% in a 3-year to 15-year comparison with the Large Growth Fund (Appendix 2).

1.3 Measurements
Long-term and short-term performances
Short-term investments typical period would be 3 to 12 months, the long-term investment wouldn't
easily be sold for years, even in some cases may never be sold. Measurement both performances
could look into the total return from both performances. Even though investor had invested in it on
that first day of the period. Also, look at how the investment has done year to date (YTD), as well as
over the past 52 weeks. Finally, consider the investment’s average annual return. Look at the five-year
average annual return but also look at the ten-year average annual return if investors are considering a
longer-term investment. Through the comparison from both performances, investors could do their
investment investments wisely.
Net asset value (NAV) assessment
NAV represents the per share/unit price of the fund on a specific date or time. Fund investors often try
to assess the performance of a mutual fund based on their NAV differentials between two dates. For
instance, one may likely compare the NAV on January 1 to the NAV on December 31, and see the
difference in the two values as a gauge to fund’s performance.

Mutual funds usually pay out virtually all of their income (like dividends and interest earned) to its
shareholders. Additionally, mutual funds are also obligated to distribute the accumulated
realized capital gains to the shareholders. A capital gain occurs on any security that is sold for a price
higher than the purchase price that was paid for it. Since these two components, income and gains, are
regularly paid out, the NAV decreases accordingly. Therefore, through a mutual fund investor gains
such intermediate income and returns, they are not reflected in the absolute NAV values when
compared between two dates.

Annual total return assessments

Total return, when measuring performance, is the actual rate of return of an investment or a pool of
investments over a given evaluation period. Total return includes interest, capital gains, dividends
and distributions realized over a given period of time. Total return determines an investment’s true
growth over time. It is important to evaluate the big picture and not just one return metric when
determining an increase in value. The total return is used when analyzing a company’s historical
performance. Calculating expected future return puts reasonable expectations on an investor’s
investments and helps plan for retirement or other needs.

1.4 Good investment criteria

Growth in Net asset value (NAV)

Constant growth net asset value indicating the capital growth for investment, higher NAV means that
the scheme's investments have fared really well. It allows the investor to have a higher redemption
price from a fund company.

Benchmark
Benchmark portfolio performance to help manage risk, most people invest in a diversified portfolio
that includes numerous asset classes, generally using equities and bonds. Risk metrics can be used to
help understand the risks of these investments. Risk is most often characterized using variability and
volatility. When investment outperforms their benchmarks and provides alpha above and beyond the
return of a benchmark, this could be a good investment decision for the investor.

Actively managed fund

An actively managed investment fund is a fund in which a manager or a management team makes
decisions about how to invest the fund's money. Compared to passively managed funds, actively
managed fund possible to beat the market index to generate great capital growth. The actively
managed fund could be a good investment decision for the investor.

Fund manager qualification

Fund manager leading funds management is the overseeing and handling of a financial institution's
cash flow. The fund manager ensures that the maturity schedules of the deposits coincide with the
demand for loans. To do this, the manager looks at both the liabilities and the assets that influence the
bank's ability to issue credit. Funds manager qualification would be important because he(she) need to
make the investment decision. In the case of the fund manager with a reliable qualification practically
or in education would be an important factor to decide it is a good or bad investment. A good fund
investment needs a professional and reliable fund manager.
2.1 What would Puglia say in response to claim that his success is luck?
Malkiel said that the stock market followed a ‘random walk’, which mean the future price movement
was uncorrelated with the past or present price movement. Malkiel said that beating the market was
like a gambling. He used coin tossing game as example, if 1000 players in this game and half of them
will be eliminated on first round and so on until the 7 th round only 8 players remain. He suggested that
the few superstar portfolio managers (example: the remain 8 coin tossing game players) could be
explained as luck.
Besides, some academics believed in efficient market hypothesis (EMH), they argued that all the
market information was efficient and reflect quickly in share prices. The academics said if the EMH
was correct it would be impossible to beat the market. One of the economists said “In such a market,
we would observe lucky and unlucky investors, but we wouldn’t find any superior investment
managers who can consistently beat the market.”
Larry Puglia’s outperformance had defied the conventional academic theories but this is not a luck.
Although Malkiel and the conventional academic theories mention that beating the market is
impossible and it was just a lucky. But some research exposed the anomalies inconsistent of EMH,
many evidences such as lower P/E multiples had a better performance than higher P/E multiples and
positive serial correlation in stock return prove these anomalies does not match with a random walk of
prices and return. This show the market was possible to beat and Puglia had the investment skill to do
it. Therefore, Puglia’s success was not a luck. His success was based on his investment strategy and
experiences.

2.2 Puglia’s investment style

Puglia’s investment style was finding the companies with durable, sustainable earnings-per-share
(EPS) growth and hold those companies for a long-term period. The main objective was long term
capital growth. Puglia will invest in large and medium sized companies that he believes can generate a
over average earning growth. Puglia will evaluate the growing market share and market size of the
company, competitive advantages of the company, fundamentals analysis of the company and
seasoned management of the company to decide his investment. Firstly, he will evaluate the market
for the company’s product and the potential of market growing in future. Next, he will identify the
sustainable competitive advantage of the company. Third, he will look to the company fundamental
analysis such as above-average earning growth, stable margin growth, strong free cash flow and ROE.
Last, he will look for the company management’s ability. Puglia also keep searching new reports,
economic data and some good track records of other managers.
2.3 How easy will it be sustain Puglia’s historical performance record into the future?
What factors support your conclusion?
It is not easy to sustain Puglia’s historical performance in future. This is because
Puglia can achieve this result is with the corporation of his research team. By looking to the
case, we know that a global research team that has around 250 industry analysts and portfolio
managers assisted Puglia to made the investment decision. The members of the research team
has covered more than 2,300 public companies around the world. Besides, the company’s
recruitment and mentoring programming also attract talented investment analysts in the
market. Thus, the company can form a group of well-trained and experienced people for the
portfolio management position in the company. Besides, the company encourages close and
good cooperation relationship between the managers, analysts as well as the professionals.
Other than that, Puglia and his professional research team has carried out lots of
research in identifying the companies with durable free-cash-flow growth. Other than that,
Puglia also employed other group of people in screening the company which has stable
earnings growth and return on equity over one, three and five years. The case did mention
Puglia words, “We’ll look under every stone”. It indicated that Puglia and his research team
will using all the information to get the portfolio investment ideas. The information they use
are the news report, economic data, etc. If there is a company meet Puglia’s quantitative
criteria, he and his research team will carry out further research on the company. The detail
Puglia and his research team want to know is the competitors, customers, suppliers, etc. to
have a more deep understanding towards the company.
Therefore, it is not easy to sustain Puglia’s historical performance record in the future,
because it needs a lot of effort and need the corporation form many party to getting the more
accurate information on what to invest.
3. What are the implications for fund managers, if the market exhibits characteristics of strong,
semistrong, or weak efficiency?
First and foremost, weak form efficiency can be defined as stock market’s up-to-date prices
fluctuate according to information like historical prices and trading volume. With market fully
reflecting information, the investors in the stock market are deemed to be impossible to earn extra
profit. So, it also indicates that all those information has no influence on the stock’s price level and
prediction of price does not exist. In addition, extra profit earned by using technical analysis doesn’t
exist in weakly-efficient stock market. This is because technical analysis has zero possibility of
making excess return in weak form efficient market.
According to case study, weak form level of efficiency claims that current price level of
stocks followed a trendless random walk that has no relationship with past patterns. It also maintained
that technical analysis that comprise of chart and data analysing doesn’t allowed the investors to earn
the arbitrage profit. Yet, fundamental analysis in weak form level of efficiency can be profitable. If the
market is weak form of efficiency, it’s possible for the fund managers to predict the future movement
of the stock price by past information, they still can find out whether today’s stock price is the highest
or the lowest. Then the managers can find right timing to issue stocks. For instance, newly issued
share is best to be offered when the market is at the peak rather than the bottom. When the market is at
the peak, newly issued share able to sell to investor at a high price which is higher return to the
company that issuing it. Moreover, financial policy like announcement of financial statement,
forecasts or news can be utilized by the fund managers. This can be beneficial to the company in
obtaining capital. Fund managers can to invest in stocks in a careful manner after doing research on
the financial statements announced by the company. Its possible for the fund managers to have higher
return than the market.
Weak form level of efficiency is under information efficiency of Efficient Market Hypothesis
(EMH) which can be defined as the degree of information about the future returns of a stock reflects
on its current prices. In other words, the outcomes of management decision will be reflected in the
stock prices in an extent that is slower and less accurate than high form level of efficiency and semi-
strong level of efficiency. So, fund managers who have financial knowledge and worked in financial
companies have the ability to get hold of the information faster than the retail investors. In addition,
fund managers have their own connections in respective field that allows them to receive news faster
than the retail investors. This allows them to improve their fund performance by reacting to the news
earlier.
Semi-strong-form efficiency is the share prices adjust to publicly available new information
very rapidly and the share price was reflected all information that can be found on public and it is
impossible to make any excess return. Thus, it’s also implied that the fund managers are unable to
utilize technical analysis and fundamental analysis to predict the future price movement due to the
technical analysis is using pass trading activities as an indicator to estimate future price movement
while fundamental analysis is using public data evaluate the stock. For example, fund managers
would use company revenues, earnings per share, expected future growth, return on equity, profit
margins, and other data to determine a company's value and all of this information are available on
company financial statements.
Thus, in order to earn excessive returns, fund managers should access for private information
that unable to achieve in public. Private information also refers to insider information which is the
information that was not disclosed to the public and can affect the share price. Typically, it can allow
someone gain by buying or selling particular shares, especially the person who working within or
close to a listed company. Based on the study Trang Hoang, Emma Neuhauser, Ph.D. , Hossein
Varamini, Ph.D (2017), it investigated the linkage between insider trading activities and market
efficiency with a sample size of 30 instances of insider buying and 30 instances of insider selling
transactions and the initial results implied that insiders are able to outperform the market in the major
cases.
Strong form efficiency states that current price fully incorporates all existing information,
both public and private. This form of market efficiency also often known as the perfect market theory.
Besides, the strong form efficiency clearly states that the management of the company are not able to
earn from trading on information that is not publicly known (Clarke, 2011). For example, a member
of a research team in the company still not able to profit from the information about the new
revolutionary discovery even this information completed about half an hour ago. It clearly shows that
the strong form of efficient market is in a form of unbiased manner, future development and
information that are more objective and current stock price is much more relied on the informative
and objective information compared to insider information in this strong form of efficient market.

When the market exhibits the characteristic of strong form of efficient market hypothesis,
fund manager cannot generate superior return on behalf of the individual investors even though fund
managers have full access of the. In strong form of efficient market, the past movement of trend of the
stock cannot be used to predict the future movement of the stock price because the stock movement
may be random and unpredictable all the time. Moreover, since the current price is fully reflected to
all information which included insider information, therefore the fund manager does not able to
achieve excessive profit by trading insider information. According to the research journal which
Testing Strong Form Market Efficiency of Indian Capital Market: Performance Appraisal of Mutual
Funds, strong form market efficiency implied that even the top management, security analysts, fund
manager etc. who have full access to the private/inside information cannot be able to earn superior
return or abnormal profit (Khan, 2011).
Conclusion
According to news, there are increasing numbers of investors move their capital to Blue Chip
Growth fund and bring along more than 15 billion Us dollar of new capital to the fund’ asset for
investment purpose. Based on the historical view, the success of Puglia’s investment was having an
outstanding performance. He funds investment performance beating the traditional academic theories
and also defeats the S&P 500 and large cap growth category in the long run. Moreover, scholars,
investors and market are wondered for the outstanding and sustainability of his fund performance.
Furthermore, at the end of 2016, they also wondered is there still have investors to buy the Blue Chip
Growth Fund and they are also curious and interested how long Puglia can outperform the market by
having 30 billion US dollar in asset to invest.
YONG HAN QI 16WBR12260
INDIVIDUAL
As an advisor I will agree investing in Puglia’s Blue-Chip Growth Fund. First of all, the Blue
Chip Growth Fund performance was good and keep increasing. In EXHIBIT 3.1, the chart shows the
growing of the T. Rowe Price Blue Chip Growth Fund was keep increasing from about 12,000 USD to
25,000 USD in 2007 until 2016. The performance of Puglia’s Blue-Chip growth fund shows the
investment strategy they were using was work very good in the market. The data also show the
growth of 10,000 USD in 10 year, the fund increase to 24,154 USD after holding for 10 year, there
were more than nearly 240% increased. According to the research, this fund had returned an average
annual total return of 10.12% which was higher than the 9.12% return of the benchmark. This fund
was outperformance for a long period and I believe it will continue his performance.
Secondly, the risk of the fund. Risk was very important for choosing a fund to invest because
it will directly affect your return. The EXHIBIT 3.7 shows large company stocks and small company
stocks have the highest and second highest risk among other type of investment. Large company
stocks had 20.1% standard deviation and small company stocks had 32.1% standard deviation.
Puglia’s Blue-Chip Fund was chosen large and medium company stocks, the risks were lower than the
small company stocks. This fund was a long-term investment, the lower the risk was better. Although
20.1% of standard deviation is still high, but the sustainability of the large company stocks was better
than small company stocks. It is because the company already pass through the rapid growing stage
and stepped into stable growing.
Thirdly, the manager’s ability of the fund was also very important when consider to choose a
fund to invest. Puglia was a very experience manager, he had more than 23year experience. The
strategy used by Puglia was very good, his performance in this fund had proven his good investment
skill. Puglia ‘s investment strategy was fundamental analysis. He will evaluate the company
performance, management, sustainability, cash flow, risk and return to make decision. He had a very
good result in this fund and prove his ability to manage fund was good. It will be more safety to put
our money to an expert for investing.
Lastly, the Puglia’s Blue-Chip Growth Fund had a better sustainability. This was because the
blue-chip stocks had more ability to survive in the financial crisis year. From the EXHIBIT 3.2 we can
see that in 2008 financial crisis year the TRBCX and S&P 500(LG) market performance was very bad
but TRBCX recovery very soon in the next year. In 2008, TRBCX performance was -42.62 and
recovery back to 42.57 in the next year. It was almost fully recovery in just one year. This show the
great sustainability power of Blue-Chip stocks in the market. It was not all the Blue-Chip stocks can
survive in the financial crisis year, but compared to the small medium cap stocks, the Blue-Chip
stocks had greater sustainability ability.
In conclusion, I will recommend to invest in Puglia’s Blue-Chip Growth Fund. The advantage
of choosing the Puglia’s Blue-Chip Growth Fund was shown in above statement. The fund
performance was very good and outperformance in the market, this can generate an above average
return to the investors. Next, the risk of this fund is lower compared to other small company stocks
fund. In addition, the fund manager had good ability and strategy to manage the fund, investors were
more likely to put the money to the expert fund manager. Lastly, the sustainability of this fund was
great enough.
Individual Assignment (Shangar A/L Sivakumar, 16WBR12282)
Suppose that you are an advisor to wealthy individuals in the area of equity investments. In
2016, would you recommend investing in Puglia’s Blue Chip Growth Fund? What beliefs about
the equity markets does your answer reflect?

I would recommend investing in Puglia’s Blue Chip Growth Fund to potential investors. This is due to
the fact that the Blue Chip Growth Fund has consistently performed in recent years, illustrated in
Appendix 1. This is because the Fund invests in companies that has growing market share and market
size, competitive advantages, and strong fundamentals. The fund is also managed my a seasoned
management with a demonstrated track record. That being said, potential investors need to be aware
that this Fund grows slowly over time and does not provide quick returns as the Fund only focused on
the long-run returns. For context, Bruner, Robert F. et al, (2018) stated that $10,000 invested in the
Fund at its inception in 1993 would have grown to $94,021 in assets on September 30, 2016. So, I
would recommend investing in the Blue Chip Growth Fund for investors who have low risk appetite,
and not for those who want quick returns in a short period of time.

Other than that, Bruner, Robert F. et al, (2018) mentioned that the Blue Chip Growth Fund invested in
companies in which the managers thought was “blue-chip status” due to their sustainable earnings-
per-share growth. They felt that it paved way for an above price-earnings ratio that allowed investors
to hold onto their investments for the long term and allowed their wealth to compound tremendously.
Blue chip businesses have very strong balance sheets, consistent growth and strong business models.
They boast of superior and sustainable cash flows indicative of past performances.

Furthermore, As illustrated in Appendix 2, the Blue Chip Growth Fund is able to endure the market
downfall during the 2007 Financial Crisis and grow consistently ever since. When faced with adverse
market conditions the Fund performed considerably better, which is also indicative of their growth
and stability. When faced with adverse market conditions, it performed considerably better, which is
also indicative of their growth and stability. Even though the Fund’s Year-to-Date performance has
been negative, I believe that this could just be a temporary correction and the Blue Chip Growth Fund
has a significant advantage over other funds as they can tide over market volatility.

I would also recommend investing in this Fund due to the management team behind it. A widely
experienced international research team, comprising more than 250 business analysts, as well as
portfolio analysts responsible for other funds, helped Puglia in this process of analysing companies.
Together, more than 2,300 public companies around the globe were covered by the analysis team,
almost two-thirds of international firms by market capitalization. The culture and structure of T.Rowe
Price encouraged and facilitated close and frequent partnership among executives and analysts as well
as equity and fixed-income experts. Their performance review and compensation policies rewarded
partnership and concentrated on long-term, not short-term results.

I would recommend investing in Puglia’s Blue Chip Growth Fund because the funds are growing
steadily. Between 1993 and 2016, the fund grew from $10,000 to $94,021. The Blue Chip Growth
Fund at its inception, in mid 1993 to 2016, had returned an average annual total return of 10.12%,
outperforming the 9.12% return of the fund’s benchmark, the S&P 500. I believe that this information
provides that markets are weak-efficient. Information is readily available to be analysed and therefore,
a proper outcome can be predicted using proper valuation methods. This allows the investors to make
a proper decision before committing their capital into this Fund.
Individual Report (Wong Weng Nam, 16WBR12243)

As an advisor to wealthy individuals in the area of equity investment, before introduce or recommend
any financial instrument to the investors, I will need to know their investment objectives, risk
tolerance level, investment time horizon and liquidity needs by the investors (Well Fargo Advisors,
2019).

Firstly, I can give my recommendation to the investor by knowing their investment objective. There is
several type of investor investment objective, which is seeking for income, seeking for growth and
income, or seeking for growth. For the seeking for income, the investor will emphasize on income
rather than consider the capital appreciation. They normally have no interest with the high volatility
financial instrument. For the seeking for income and growth, the investors will emphasize on income
and capital appreciation. They normally will accept some exposure to the high volatility financial
instrument. For the seeking for growth, the investor will emphasize on capital appreciation. They can
accept the significant exposure to the high volatility financial instrument, and they have less
consideration to the current income too. Hence, I will recommend investing in Puglia’s Blue Chip
Growth Fund to the investors who emphasize on the capital gain.

Because everyone has a different perspective on factoring risk into his or her investment strategy.
Therefore, I can give my recommendation to them by understanding their risk tolerance level. The
risk tolerance level is the amount of risk the investor can accept in order to achieve their investment
goals. There are few types of risk tolerance level of the investors, which is conservative, moderate and
aggressive. The conservative investors will accept the lowest amount of risk in order to achieve their
goals. The moderate investors will seek a balance between the appreciation and stability of their
investment portfolio. While the aggressive investors will accept high risk to achieve their investment
goals. Therefore, if the investor are the moderate to high-risk takers, I will recommend the Puglia’s
Blue Chip Growth Fund to them.

After knowing the objective and risk tolerance level of the investor, there is another important criteria
I need to know to give my recommendation, which is the investment time horizon of the investors.
The investment time horizon is the expected period they plan to invest to achieve their financial goals.
The investment time horizon can classify to five type, which is immediate, short-term, intermediate,
moderate and long-term. For the immediate type, the investor will only hold their investment in a very
short term like less than one-year. For the short-term type, the investor will invest and hold their
investment for one to three years. For the intermediate type, the investor will invest and hold their
investment for three to five years. For the moderate type, the investor will hold their investment for
five to ten years. While for the long-term type, the investor will normally hold their investment for
more than ten years. Therefore, I will recommend the Puglia’s Blue Chip Growth Fund to the
investors who want to invest long term.

Lastly, I need to figure out how liquidity they need in their investment portfolio, because with the
liquidity measures, the investors can meet their financial with their available liquid assets. Some good
example would be the cash, real estate, collectibles, etc. The liquidity needs of the investors, it can be
classified as three type, which is none, moderate and significant liquidity needs. For the none liquidity
needs, the investors have other sources of cash, they normally investment by using their none liquid
money. For the moderate liquidity needs, the investors may need quick access to cash when there is
some event happen. While for the significant liquidity needs, the primary needs of the investors is the
liquidity. The investor under this type of liquidity needs, they will only choose the high liquid
financial instrument to invest. Hence, if the investor prefer none liquidity I will recommend Puglia’s
Blue Chip Growth Fund to them.

In conclusion, for those investors who are willing to take higher risk with longer investment time
horizon to earn capital gain, I will recommend them to invest in Puglia’s Blue Chip Growth Fund. The
reason I recommend this fund is the fund categorize as the large growth fund under the mutual fund.
Normally the growth funds will have better performance in their revenue and earnings when the
economy is in the mid to late phase of the business cycle by comparing to the other type of mutual
funds (The Balanced, 2019). The funds will only pay a little or no dividends to the investors. They are
more focus on appreciation of capital compare to income. Besides, the company choose by Puglia has
a strong fundamentals. According to Morningstar, Puglia was invest in well-established large and
medium size of company, the risk expose are low due to the company have strong fundamentals like
outperform earnings growth, stable increase margins, adequate of free cash flow which meant the
company has a high return on equity and low liquidity risk exposure. The Morningstar also mentioned
a historical investment in Puglia's Blue Chip Growth Fund, which is $10 thousands invest in the
Puglia funds in mid of 1993 have grown to around $94 thousands in assets on September 2016. It
stated that the Puglia’s fund is significantly outperform the average growth for the large cap growth
category.
References
The Balanced, 2019, “What are growth stock mutual funds?” viewed 30 June 2019,
<https://www.thebalance.com/what-are-growth-stock-funds-2466757>.

Wells Fargo Advisors, 2019, “Review your investment objective.” Viewed 30 June 2019,
<https://www.wellsfargoadvisors.com/profile/index.htm>.
Individual Tan Ming Jie (16WBR13545)

As an advisor to wealthy individuals in the area of equity investment, before I make

recommendations to my clients to invest in Puglia’s Blue Chip Growth Fund, I would classify my
client based on their investment goals and the level of risk tolerance which they is a risk taker, risk
averse or risk neutral.

Investment goal can classify to short, medium and long term. Short term is those investments
that less than 2 years, medium term mean the investment period is from 2 to 5 years and long term
investment period is more than 5 years. Different investors would have different investment goal and
the goal is influenced by the demographic factors. According to the study Nneka Rosemary Ikeobi and
Peter E. Arinze (2016), reveal that investors’ employment status and income level are the most
influencing factors on their investment objectives. While income has significant effect on all
investment objectives, not matter is long medium or short. Moreover, employment status has
significant effect on all investment objectives with the exception of diversification objective.
Employment statuses are involved worker, employee, self-employed, director and office holder. Apart
from that, the educational qualification of investors also has a significant effect on security investment
objective. Furthermore, I also would like to know the level of risk tolerance by investors which are a
risk taker, risk averse or risk neutral. Risk taker is the level of risk tolerance for the investors are high;
they are willing to take a high risk investment without concern about the investment return. Risk
averse investors are those who prefer lower return for risk they know rather than the higher return but
the risk is unknown. In other words, they are resisting the risk. Next, risk neutral investors are the
person who indifferent the risk. They ignore the risk when they are making an investment decision,
for example, giving risk neutral investors’ two investments with different levels of risk, the investor
would only consider the return for each investment.

As an advisor, I would recommend investing in Puglia’s Blue Chip Growth Fund in year 2016
for investors who investment goal is for long term and also are the risk averse investors. The reasons
are the fund’s objective is long-term capital growth and the income is only the secondary
consideration. Thus, this fund is more suitable for investors who have additional capital for investing
and the main objective is not for income purpose and without liquidity or cash flow problem. In
addition, Puglia was invested in well-established large and medium sized companies, thus the risk is
also low due to the companies having strong fundamentals including above average earnings growth,
stable to improve margins, adequate for free cash flow which means the companies having lower
liquidity risk and good return on equity.

Apart of companies have strong fundamentals, the companies choose by Puglia are the
companies with growing market shares and market size. The reason is a company with big market
shares normally are the big company with cost advantages and pricing advantages, thus the company
can make its products cheaper due to the company can produce more of a product, the average cost to
making each product would be fall. So the profit would rise at the end. However, superior market
share is not a good indicator for marketplace with declining, so Puglia also evaluated the market for a
company’s products and how large the markets can grow over time. Besides that, Puglia also used the
Professor Michael Porter’s competitive analysis (Porter five forces) to identify companies’
competitive advantages. Lastly, the reason why I recommend in Puglia’s Blue Chip Growth Fund is
Puglia would choose the companies that able to allocate the capital to the highest return business and
manage the expenditure well.

Besides that, Puglia Blue Chip Growth Fund has growth to 94,021 US dollar in assets on
September 2016; the fund had outperformed the average growth compared to large-cap growth
category and growth from investing in S&P 500 which 56,185 US dollar and 76,100 US dollar
respective. Other than that, there have more and more money was added to the fund due to the
increasing of investors. In the aspect of average total annual return, the fund had outperforming to the
benchmark of fund S&P 500 on September 2016 by generated 10.12% of average total annual return
while the S&P only generated 9.12% of return.

In conclusion, as an advisor, I would recommend investing in Puglia’s Blue Chip Growth

Fund because the fund was invested in well-establish large and medium-sized companies, thus having
strong fundamentals including above earnings growth, stable to improve margins, strong free cash
flow and good return on equity. Moreover, Puglia would choose the companies with growing market
shares and market size consist of cost and pricing advantages. Furthermore, Puglia also used the
Porter five forces to identify companies’ competitive advantages and he also would choose the
companies that able to allocate the capital to the highest return business. Lastly, Puglia Blue Chip
Growth Fund had outperformed the average growth and average total annual return compared to
large-cap growth category and S&P 500.
References

Market business news, What Is Risk Neutral? Definition And Meaning, viewed 30 June 2019,
<https://marketbusinessnews.com/financial-glossary/risk-neutral-definition-meaning/>.

Nneka Rosemary Ikeobi Peter E. Arinze , 2016, The Influence of Demographic Factors on the
Investment Objectives of Retail Investors in the Nigerian Capital Market, viewed 30 June 2019,
<https://pdfs.semanticscholar.org/3471/1d7c32d35963820584f52f582031e59ff6e5.pdf>.
Individual Written Part (Chung Mun Hou 16WBR12622)

As an advisor to wealthy individuals in the area of equity investment, I would strongly

recommend investing in Puglia’s Blue Chip Growth Fund based on the evaluation and justification of
the excellence performance of equity market.

The Puglia’s Blue Chip Growth Fund has been known as an investment that is designed to
track stock-market indices, the outcome of the funds will be affected by the fluctuation of the equity
market. This fund has been awarded as second-highest rating, four stars for overall performance of the
fund, such high rating could reflect above-average returns, below average risk or both. This
recognition clearly shows that invest on Puglia’s Blue Chip Growth Fund is a reliable and trustworthy
as an investment decision.

Besides, the number of mutual funds that offered in the United States has increased from 361
to 9520 which shows that mutual-funds industry is growing. Among many types of mutual funds,
funds that being focus by principal on investing in common stocks represented the largest segment of
the mutual-fund industry clearly shows that equity market playing an important role in terms of the
mutual fund industry. Based on the case research, the growth of mutual fund industry has led 31% of
the outstanding stock being owned by mutual fund in 2015. In consequences, this situation increases
the power and influence of institutional asset managers on the equity market, allowed them to move
huge sums of money in and out of securities. Therefore, the role of institutional investors that invest
on behalf of millions of individual account holders is important which cause the increase in trading
volume, average-trade size and block trading. As a result, the growth of equity market will be moving
rapidly due to high trading volume, and this is the reason I would recommend investing in Puglia’s
Blue Chip Growth Fund.

Moreover, the objective of Puglia’s Blue Chip Growth fund was more focus toward long-term
capital growth by investing in large and medium sized companies as he believed those companies
potentially provide greater earnings growth. To enhance the stability of the portfolio, Puglia only
includes those companies that fulfil the requirement to be included in the portfolio such as growing
market share and market size, companies with sustainable competitive advantage, strong fundamental
and seasoned management with a demonstrated track record. Such strategy of Puglia that only find
companies with durable, sustainable earnings-per-share growth could ensure investor generate stable
earnings growth in the long term which also consider one of the reasons to recommend Puglia’s Blue
Chip Growth Fund as an investment decision.

Besides, Puglia assisted by a professional research team that included more than 250 industry
analysts and portfolio managers to manage the funds, it clearly shows that confidence in investing on
Puglia’s Blue Chip Growth Fund with such good management that contribute a great research team
for client. The structure of Puglia’s Blue Chip Growth Fund also encourages the collaboration
between managers and equity professionals, therefore this funds could potentially become a good
choice in the area of equity investment.

Furthermore, the Morningstar state that $10,000 invested in the Blue Chip Growth Funds
have grown to $94.021 on September 30, 2015, it shows that the equity market is working good in
generate this great outcome. Based on the research, Puglia’s fund outperformed the average growth
for the large-cap-growth category of $56,185 and achieved the return of $76,100 from investing in the
S&P 500. It does clearly shows that condition of the equity market is working well for the objective of
Puglia’s Blue Chip Growth fund that focus toward to long-term capital growth by investing in large
and medium sized companies. Puglia believed those companies potentially provide greater earning
growth. To enhance the stability of the fund’s portfolio in such equity market condition, Puglia only
includes those companies that fulfil the requirement to be include in the portfolio such as growing
market share and market size, companies with sustainable competitive advantage, strong fundamental
and seasoned management with a demonstrated track record. Such strategy that finding companies
with durable, sustainable earnings-per-share growth could make sure investor generate stable earnings
growth in the long term is having benefit in a good equity market which also consider one of the
reasons to recommend Puglia’s Blue Chip Growth Fund as an investment decision.
Wong Hee Chih (1612499)

Individual

As an advisor that expertise in equity investment, my recommendation for investors is to invest

in Puglia’s Blue Chip Growth Fund. First thing that support my recommendation is none other than
the fact that this fund is a growth fund. Growth fund can be defined as a diversified portfolio with
long term objectives. It comprises of good revenue growth companies with potential without
considering short term objectives. In the recent years, the market has been volatile and short term
goals are unreachable. Moreover, Puglia’s Blue Chip is formed with medium and large size blue chips
companies that have strong financial fundamental and consistent earning growth. So, Puglia’s Blue
Chip growth fund which can perform well in long run is the answer for investment decision.

Besides that, fund performance is another factor that seconds my statement of recommendation. In
EXHIBIT 3.1, T.Rowe and Puglia’s Blue Chip has higher index than the S&P 500 TR USD which
represents the total return index (financial market index) for similar available funds in the market.
Puglia’s Blue Chip has $ 24,101.23 which is higher than the benchmark of S&P which has
$20.644.16. This proves that the performance of Puglia’s Blue Chip Growth Fund is above the market.
In EXHIBIT 3.2, in the total returns data, majority of the top 1 total return belongs to Puglia’s Blue
Chip Growth Fund. In the categorized time year-to-date, the fund gets number one seven out of ten in
total returns. The performance of this fund without doubt has been doing well and leading the other
funds in the market.

The experience or track record of the fund managers or companies that controlling the fund is
experienced and professional. The entity behind the funds plays a vital role in bringing profit to the
investors. The tenure of the fund manager or the company can tell how trustable they are. This fund
has been around for 23 years. This proves that the fund company is expert and professional.
Moreover, the fund company are able to adopt to the fast-paced changing environment and remain to
stay profitable until now. Besides, everyone always goes for big names. The reputation of Puglia’s
Blue Chip Growth Fund precedes the performance of the fund. When comes to choosing which fund
to entrust money in, the higher the reputation of the fund lower the risk of default.

More than that, Puglia’s Blue Chip Growth Fund’s overall results claimed to be not parallel with the
conventional academic theories. Normal academic theories states that the market is highly
competitive, easy access and informational efficiency, which could also means that it is impossible to
sustain in the market. Yet, this fund’s consistency in outperforming the market has been their main
attraction. The way the fund improve sustainability mainly focused on the selections of companies
that be included in the portfolio. There are several things that a company need to possess to be
included in the portfolio. The company has to be with growing market share & size, competitive
advantage, firm fundamentals and strong management with excellent track record.
Low Kwong Yong (15WBR12036)

Individual

As an advisor to wealthy individuals in the area of equity investment, I would strongly

recommend investing in Puglia’s Blue Chip Growth Fund based on the evaluation and justification of
the excellence performance of equity market, my client investment goals and risk tolerance level.

In year 2016, 3year average risk and return measures from Morningstar rated T. Rowe Price
Blue Chip Growth Fund are having average stage in risk and return. T. Rowe Price Blue Chip Growth
Fund had been classified as large growth in fund category and investment style. Investment strategy
of T. Rowe Price Blue Chip Growth Fund relatively aggressive, this fund will normally invest at least
80% of its net assets in market for emphasizing the objective of long-term capital growth.
Performance of this fund is having a stable growth, a stable increment showed in last five years NAV
data and performance records. Growth of $10,000 is $94,021 on September 30, 2015.This fund have
the average growth for the large-cap-growth category of $56,185 and achieved the return of $76,100
from investing in the S&P 500. In the sector of average total annual return, the fund is having the
benchmark of fund S&P 500 on September 2016 by generated 10.12% of average total annual return
while the S&P only generated 9.12% of return. T. Rowe Price Blue Chip Growth Fund considered as
aggressive style investment and suitable for long-term investment objective.
Separated of organizations have solid essentials, the organizations pick by Puglia are the
organizations with developing pieces of the pie and market estimate. The reason is an organization
with huge pieces of the overall industry regularly are the enormous organization with cost favourable
circumstances and estimating preferences, subsequently the organization can make its items less
expensive because of the organization can deliver all the more an item, the normal expense to making
every item would befall. So the benefit would ascend toward the end. In any case, predominant piece
of the overall industry is certainly not a decent pointer for the commercial centre with declining, so
Puglia likewise assessed the market for an organization's items and how enormous the business
sectors can develop after some time. In conclusion, the motivation behind why I prescribe in Puglia's
Blue Chip Growth Fund is Puglia would pick the organizations that ready to distribute the cash-flow
to the most astounding return business and deal with the use well.
Liquidity for the clients’ portfolio is very important as well, on the grounds that with the
liquidity measures, the speculators can meet their money related to their accessible fluid resources.
Some genuine model would be money, land, collectables, and so on. The liquidity needs of the
speculators, it very well may be delegated three sorts, which is none, moderate and noteworthy
liquidity needs. For the none liquidity needs, the financial specialists have different wellsprings of
money, they regularly venture by utilizing their none fluid cash. For the moderate liquidity needs, the
financial specialists may require speedy access to money when there is some occasion occur. While
for the huge liquidity needs, the essential needs of financial specialists are the liquidity. The
speculator under this kind of liquidity needs, they will just pick the high fluid money related
instrument to contribute. Consequently, if the speculator inclines toward none liquidity I will prescribe
Puglia's Blue Chip Growth Fund to them.
Wealthy client can be classified in high risk tolerance category, with a deep understanding of
securities and their propensities allows such individuals and institutional investors to purchase highly
volatile instruments, such as small company stocks that can plummet to zero or options contracts that
can expire worthless. While maintaining a base of riskless securities, aggressive investors reach for
maximum returns with maximum risk. Wealthy client emphasized in capital gains, investors seeking
capital gains are likely not those who need a fixed, ongoing source of investment returns from their
portfolio, but rather those who seek the possibility of longer-term growth. Long term investment
period is above 5 years.
In conclusion, I would suggest client to choose Puglia's Blue Chip Growth Fund as their
investment decision due to the performance of Puglia's Blue Chip Growth Fund, investment strategies
from this fund, liquidity consideration and the client risk tolerance level. Puglia's Blue Chip Growth
Fund is well matched the client risk tolerance level or bearing the risk that lower than expectation to
maximize capital gains in equity market.