Cuevas and Martinez-Valls Project 2+3

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PORTFOLIIO!STARTEGY!
FOR!BENJAMIN!LUIPPOLD!
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TABLE OF CONTENTS
I - TEAM PRESENTATION!
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II- OUTLOOK OF MACROECONOMIC ENVIRONMENT!
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III- CLIENT PREFERENCES & PORTFOLIO OBJECTIVE!
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IV CLIENT ASSET ALLOCATION!
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V- FIXED INCOME PORTFOLIO!
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VI)!ASSET!ALLOCATION!TO!FIT!STRATEGY!
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I - Team presentation
At Seekinver we focus on alternative investments leveraging on our fresh look at the market. We are experts in the
EMEA region and yet we take a holistic and global approach in our recommendations. We are passionate about
social investments and we believe in the power of financial markets to create positive nudged to change the world.
Eric Cuevas is a current exchange student at Babson College,

originally from IE University where he was awarded Academic
Excellence Scholarship in four consecutive years. He has grown fond
of financial markets and corporate Law and is now an incoming DCM
analyst at Morgan Stanley
An entrepreneurial mindset, a hard working attitude and great strategic
thinking define his character. Eric believes in diversity and
internationality as the key to success in todays business world. He has
worked in many different countries and fluently speaks more than
four languages. His work experience ranges from international
companies such as Clifford Chance and Qoros Auto to social
businesses and entrepreneurial projects like CYFI and Pangea.
Eric is ready to be challenged.
Ana Martnez-Valls is a current Law and Business student at IE University.

She organized the first TEDx event hold in an international university in
Spain.
Ana has a drive to achieve. She competed in athletics at a national level and
was awarded two scholarships based on academic excellence from the AEFE
and from IE Business School Foundation.
She is always pursuing growth, which is why she spends her summers
working for international companies such as Banco Santander and Nomura,
as well as with start-ups and in non-profit organizations such as UNICEF.
She loves extreme sports, such as skydiving. Ana is also an avid writer, and is
part of the French association of the Literature winners of the French
Concours Gnral.
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II- Outlook of Macroeconomic environment

Life is not about waiting for the storm to pass, but rather, about learning how to dance in the rain
Our take on the markets: If you are worried about the current evolution of the markets, then you are probably
overexposed. Markets fluctuate day after day, and an investor needs to feel safe at any time.
In a snap shot:
US equities are overvalued
Euro is undervalued
Interest rate in the US will raise in Q2 of 2017
Oil prices will go up in 2016
We are bearish on Europe, Neutral on USA and bullish on Asia-Pacific
We are bullish in Nigeria, bearish in France
Europe:
-Economy: The EU economy is still lagging behind global economic recovery. GDP in the Euro area has grown by
1.2% while still remaining highly polarized between the 2,2% growth of Luxemburg and the -4,8% decrease of
Cyprusi. The ECB has started its Quantitative Easing efforts in January 2015, the effect of which was already priced
in the market and therefore had minor impact on the economy. The Euro did however experienced a downward
rally and is aiming at parity with the US dollar by April 2015, which together with lower oil prices may help trigger
higher demand. A weaker currency will impulse exports, but yet the economy is expected to stagnate in the coming
year, with a risk of deflation in mind.
-Society: Europe is currently facing a turning point in the evolution of its European Union. The economy stays
polarized between the south, more service oriented and based on tourism (Portugal, Italy, Greece and Spain) and
the north relatively more industrialized (France, Germany and others). The EU is facing instability due to Greece
and its constant inability to stabilize its sovereign budget despite financial assistance form other Member States.
This is creating tension among countries and threatens to polarize politics into extreme rightwing and leftwing,
making it more difficult to pass on new legislation and implement changes. Society also experiences high number of
unemployment.
-Markets: Financial markets are highly volatile due to indecision from investors. Major European indexes are at 5
years record highs while interest rates are at virtually 0%. Credit agencies are starting to regain faith in sovereign
debt but this may well be artificially create by the actions of the central bank.
-ABS in Europe
The ECBs planning to stimulate Europes economy by buying ABS that started in November is starting to show
signs of working. Thanks to this plan banks can free up their balance sheets while they sell their ABS at reasonable
prices. In fact average prices for EABS are at 98.2 near the highest since October 2007 and are expected t
continue increasing. This is because of the lack of supply in the ABS primary market derived from the little issuance
in the past five years. Indeed the EABS market contracted more than 40% since 2010; while annual issuance
averaged 77 billion in the past 5 years, down from a peak of 524 billion on 2006 (JP Moragan & Co.).
-Our take: Hold. We recommend to hold on to investments in equities. Buy. We recommend to buy Euro
currency. Sell. We recommend to sell mid-term bonds.
USA:
-Economy: GDP growth in 2014 was of 2.2%ii and we expect it to be 3.1% in 2015 above trend. Recovery is
broadening due to increase across home building, investment and internal demand. The FED has stopped its
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quantitative easing program, which has helped the dollar grow stronger. An increase in rates is likely to come in Q2
of 2016. Growth is likely to be consistent until 2018.
Society: Unemployment rate is steadily decreasing since 2010 and is now at 5.1%, however, it does not represent
full employment. Important political developments are to arise during 2015-2016 in anticipation of Presidential
elections.
-Markets: Equity markets are at history wide record highs, probably overvalued. This may be the results of investors
moving assets into the US market as one of the few regions with average growth to risk ratio. Additionally, equity
markets have been pushed upwards by the latest increase in the price of dollars. Prices of fixed income are expected
to drop in the coming months as an increase in rates is anticipated.
We found of interest to relate to BlackRock analysis: Where you hold your duration matters as much as how
much duration you hold.
Since the sharpe of the yield curve likely changes dramatically when the Fed starts hiking rates, we must consider
not only how much but where along the maturity spectrum our portfolio of fixed income instruments lies with
regards to interest rate risk.
Our outlook is that that interest rates across the maturity spectrum will rise modestly once the Fed starts hiking
rates but that the largest increases will lie in the shorter maturities. The logic will lead investors to think that shorter
maturity exposures should be less volatile since because of their lower duration they are less affected by a rates
liftoff. Therefore the Feds policy could end causing great risks in areas of portfolios where investors expect the
most safety.
-Our take: Hold. AAA, technology and commodities equities Buy. TIPS Sell. Index funds and mid-term bonds.
Asia-Pacific
2015 will be a great window of opportunities for Asia. We expect important structural reforms triggered from new
political leaders elected in 2014. Heavy investments in infrastructure will be made and will positively affect the
medium term growth. India looks very attractive with its new government and a great direction for economic
growth. Thailand, is ready for its recovery from 2014 setback. Indonesia has eliminated gasoline subsidies and will
now have further available fund in order to invest in development and education. China will be growing at a lower
pace of around 7% in 2015 and lower than that in 2016. China is looking less attractive as well due to its important
burden of debt.
-Our take: Buy. We are bullish on Asia-Pacific and see potential opportunities in both equities and bonds.
Latin America:
Latin America will be growing over all at a pace of 1 to 1.5% with very heterogenous performance across countries.
The region remains interesting for investments but needs to address macroeconomic imbalances and structural
reform. Major challenges related to the strongest dollar and a drop in commodity prices.
Argentina and Venezuela are expected to suffer through 2015-2016. Those two countries are suffering from
budgetary imbalances and are exposed to political instability. They represent a higher beta than average and we
expect inflation to continue growing while GDP to decrease.
Brazil and Mexico represent two very good performing economies with expected GDP around 3%. Mexico being
very tied to US economic cycles, we expect the economy to outperform the average. However, Brazil still needs to
undergo structural reforms in order to balance their spending from the past years.
Smaller countries such as Chile, Colombia and Peru, which are extremely well managed by its leaders are expected
to perform positively. However, those countries will need to find a way to replace part of the GDP which will
diminish due to lower commodity prices.
- Our take: Buy. Mexico, Chile, Colombia, Peru. Hold. Brazil. Sell. Venezuela and Argentina.
APPENDIX PART II
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Sources & methodology for the macroeconomic analysis
Ending comments:
We have derived our data from a pool from industry consensus, and individual research.
We are working under the assumption of eldering demographics in US, Japan and Europe which will
affect medium term growth. We are highly concerned about political instability in Europe and we doubt
of its growth potential in the coming years. We are enthusiastic about Latin America and Asia as they
turn into internal-demand-driven economies.
Changes in forecasts, trends and opinions on the markets will be re-evaluated constantly. Once a month
the management team will meet in order to discuss the implication of international economic
development on this portfolio and changes in asset allocation will be decided if necessary.
Asset allocation will be based on risk minimization, while a portion of the allocation is focused on
abnormal results. We bet on sustainable growth over a continuous timeframe. We will seek investments
that are consistent with this philosophy.
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III- Client preferences & portfolio objective

Brief portfolio information summary
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Horizon: Long term

Returns required: Average 5% in 8 yr
Risk preference: Medium- high, around 40% aggressive investment and 60% safe returns
Constrains: investments that could question morality
Preference: to have a large proportion of indexed funds or ETFs
Analysis of portfolio definition & objectives

Horizon
The objectives for this portfolio are:
To save money for college and for paying a mortgage
To reinvest the rest of the money for future expenses
10 yr perfectly matches the later needs since in this time period the money will be needed to pay for
college and it is a desirable time spam for our client that will then realize which are its needs for the
upcoming future before retirement. However our client will like to have some liquid securities just in
case he is in need of some money during this period of time.
Required
Our client wants to beat the average returns given in by the Barclays Capital Aggregate which have
returns
been in the last 10 years 4,7% (see app. 2.1). Indeed our client is requiring at the same time capital
preservation ( 60%) and income ( 40%) .At the beginning our client wanted a 5 yr portfolio but he
agreed that for fixed income a longer time spam is sometimes needed to perceive great returns.
Risk
In order to achieve these returns our client is ready to have a grand total of 60% safer returns and 40%
preference
more riskier investments. This preferences match the results obtained in the risk appetite test that our
client passed where he obtained a score of 30 (See app 2.2) This means that within the group of the
people with high tolerance to risk he has a conservative profile. Our client responded affirmatively and
in the desired way to some key questions that determine ones risk (see app. 2.3 & 2.4). Additionally he
showed his disposition to invest in the asset classes that match in some medium to high asset classes
such as foreign company stocks, small cap stock and funds and high yield bond funds. His risk
preference is in line with his personal situation where he is able to cover for all his expenses with his
personal income.
Constraints
Our client will prefer socially responsible investments what implies avoiding all the sectors that could
question ones morality. This is for example the case of companies that exploit its workers or entities
that negatively impact the environment.
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Preference
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The preference will be to achieve the desired returns while having at least a 20% of liquid assets that
could be easily sold if our client were to need some money during the next 10 yr.
There are no preferences related to tax optimization or tax advantages
Our client would like to have the reports about the portfolio performance in $ even if he underlined his
willingness to have assets across different currencies
Our client restated his willingness to be protected from interest rates hikes in the US and mentioned
his preference for a sort of bullet or barbell strategy
APPENDIX PART III

2.1 Average returns
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2.2 Tolerance to risk test result
2.3 Main questions used to evaluate tolerance to risk
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2.4 Analysis of the most important questions related to our client risk appetite
Their friends describe him as a risk taker willing to take risks after adequate research.
! This statement reaffirms our client willingness to take measured risks to beat the benchmark
When he thinks about the word risk the first word that comes to his mind is uncertainty
! This shows our client awareness about the implicit risks in a more aggressive investment strategy and his
willingness to bet on them
In an scenario where he is given $2000, he would prefer to have a 50% chance to loose and a 50% chance to
get nothing rather than having a sure gain of $500
!This is a manifest of our client disposition to be exposed to some losses rather than obtaining modest returns
If he had to invest in a portfolio he would like to have 30% in low risk investment, 40% in medium risk
investment and 30% in high-risk investment.
! The later answer confirms our client preference in risk allocation across the portfolio
30%!
40%!
30%!
If a relative gives him an inheritance of $100,000 stipulating that all the money should be invested in ONE of
the four choices given by the legatee (see q.11 annex 2.3) he stated that he would prefer to have a portfolio
of 15 stocks
! This statement confirms our client willingness to have a big portion of equities in the portfolio but also it
confirms his average to high-risk profile.
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IV Client asset allocation

After analyzing the objectives of our client and taking into account the stability of the principal investment, the
income and its growth as well as the capital appreciation required to fulfill those objectives, we have conclude that
the best asset allocation by type is the following:
Data from Portfolio Optimizer www.excel-portfolio-optimization.en.softonic.com.

We initially divided the portfolio into two different asset classes: the S&P500 Index Fund in order to simulate
exposure to equities, and we used the US 10 Year Treasury Bond in order to represent fixed income assets. We
provided an equal weighting to each of the asset classes and we used the returns of the S&P500 during the years
1955 to 1970 as a benchmark for our calculations. We provided the algorithm with a required return of 5% and we
finally set the filter for the Maximum Sharpe ratio possible. With those settings, the algorithm optimized our
portfolio allocation as 60% in equities and 40% in fixed income. Those are the results we will take into account for
our portfolio creation for our client.
From this point onwards we will focus on analyzing and picking the best fixed income securities in order to create
the bond portfolio that will represent the 40% of the total available funds.
Despite the previous analysis performed, Seekinver is flexible in its recommendations in order to accommodate
clients needs. This is why in the following chart we showcase an alternative scenario allocation for our main asset
types. We recommend our client certain maximum and minimum percentage of exposure to each of the asset types
that are more likely to meet its investment objectives.
Asset Class
Normal
Allocation
Maximum
Allocation
Minimum
Allocation
Equity
60%
70%
50%
Fixed Income
40%
50%
10%
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V- Fixed income Portfolio
General philosophy
The portfolio will provide a yearly 5% return. The portfolio will have a 60% equity and a 40%
fixed income. This is because we believe that equities will give higher returns amid an
environment where the Fed will promptly hike rates and where outflows of money are coming to
the US bond market due to the tightening of European bond spreads and the weak Euro
currency. At the same time, in current low rate environment, it is important to have a considerable
number of holdings in the fixed income in order to provide the necessary income and to reduce
overall portfolio volatility.
A- Goals in the fixed income space
We believe that a well-diversified fixed income portion of our portfolio will provide the diversification
benefits that bonds have historically provided together with their income potential. The main challenges which may differ between countries- in the fixed income part of our portfolio are (1) low rates, (2)
inflation and a (3) growing economy. The latter will be overcome with our investment objectives:
For growing economies (US, UK, India, Thailand)
(1) Hedging potential losses after a hike in rates and finding opportunistic securities in such an
environment
(2) Fighting the impact of inflation on yields and purchasing power once rates raise
Slow/no growing economies (EU)
(1) Taking advantage from the cheap currencies and an environment where no rate increases are
predicted for the short term
(2) Find opportunities in a context of a deflationary economy where some assets could be
underpriced due to the macroeconomic context
All
(3) Generate income in a low rate environment (in US, EU, UK) and beating the benchmark by
obtaining a 5% return
Process in developing the fixed income portfolio
The allocation was devised always taking into account the fundamental goals defined in the previous
section. We anticipate the long-term allocation mix will approximate a 60-40 blend of stocks and bonds;
however, allocations for either asset class may range from 35 percent to 65 percent.
The first step in our process was to understand the market conditions and the economic and
demographic trends present in the current reality of todays environment. For this purpose we used
different tools and reports from expert researchers that allowed us to better perceive the reality in
emerging markets as well in more mature economies such as the US. Additionally, we analyzed
investment strategies that other financial managers from prestigious firms were carrying out in order to
have a better idea on where the market was heading.
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Once we had our market outlook figured out we went back to our clients needs and objectives. With this
in mind we tried to find investment opportunities that will go in line with the market trends and that will
fulfill our clients need. This was a very delicate step since we wanted to be both concise and at the same
time come up with a comprehensive and extenuating list of possible investments. We took into
consideration our client need for not being exposed to the oil industry, which was a difficult decision to
make since this market looked to us a very interesting place to be at the moment. Finally, we came up
with a list of possible investment strategies from which we derived our final asset allocation.
Our final decision was made following a structured and arithmetic strategy. We listed all the possible
investments in a table and we benchmark them against a list of different variables that were important to
our client. For each variable, we provided a different weight depending on the importance that our client
and ourselves attached to it. Finally we multiplied the scores of each investment option against each
variable weight and we added the subtotals in order to come up with a definite score for each of the
investment opportunities.
We finally selected the top 7 investment options and we used them in order to create our portfolio for
our client.
This method is subject to revision and we will continue improving our asset allocation methodology as we
continue to work with our client in the coming months.
B- Strategic Fixed income portfolio
In this part we are going to explain how each investments fits both in the portfolio and in the current
macro environment. We have summarized all this information in a table (see annex I , Part V).
Expectations: The yield curve tends to flatten when the difference between long-term and short-term
yields narrows. Since the start of 2014 the difference in long-term and short-term rates has been steadily
declining. Our outlook for the upcoming months is in that US short-term rates will rise more than longterm rates and therefore we believe that US yield curves will continue flattening. In fact, the later have a
greater correlation to movements in interest rates and will show a greater increase once the Fed
commences the cycle of rate hikes. A barbell strategy tends to do well when the yield curve flattens. That
is why in a context where rates are likely to rise in the US we have decided to apply the barbell
philosophy.
A barbell strategy is one that offers exposure to short-term and long-term debt with little or nil exposure
to medium-term deb. Indeed, distributing the principal of the portfolio between short-term and long-term
maturities can provide investors with a best-of-both-worlds advantage. Now we will explain why:
a) Short-term:
Short-term maturities allow for more frequent reinvestment of principal and in this environment of rising
rates, it allows one to invest the maturing principal at progressively higher rates. Furthermore, it gives one
time to pinpoint opportunities and select whichever part of the yield curve is providing higher relative
advantage -once the macroeconomic environment stabilizes. This could likely maximize portfolio returns.
ASSET%ALLOCATION%TO%FIT%STRATEGY%
Simple short-term bonds seemed too risky for us because of the uncertainty on when exactly interest rates
will raise in the US. Precision and certainty are extremely important in the short term and we have no
data available to be certain about short term maturity individual investments. That is why we have decided
to in the SPDR Barclays Floating Investment Grade that has 60% of short-term maturities. In fact,
floating rates are a very good way to benefit both from an environment where rates are rising and
reinvestment advantage can emerge. The latter will pay based on periodically reset market rates while
having a little risk of loss of principal for their small exposure to interest rate risk. Once interest rates will
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rise we will sell our positions in the fund: so in 3 yr time. Indeed we think that the Fed will need 3 yr to
steadily increase rates at the level they should be to meet inflation and prevent excessive volatility in the
financial markets. In this very context we have decided to invest in the Proshares Short 7-10 yr treasury
by holding it as a synthetic short term bond since we are planning to sell our positions in the fund in the
short term (3 yr) when we expect rates in the US to stabilize. Investing in the latter negative duration ETF
will protect us from the rise in interest rates by lowering our overall portfolio duration and interest rate
risk. We are going to pair this relatively expensive ETF with the SPDR Barclays Floating Investment
Grade to achieve the required return our client desires.
Also the abovementioned funds are very liquid and therefore they meet our clients objective of having at
least 40% of the portfolio on liquid assets in case an emergency were to occur.
! By following such strategy we will be achieving objectives (1) and (2) of our fixed income
portfolio
b) Long term
When the curve steepens, the strategy tends to underperform. That is why we have decided to put in the
other side of our portfolio long-term securities. Long-term maturities seldom move in lockstep with
changes in the federal funds rate. Long- term bonds are not only influenced by rate changes but also by
other macroeconomic factors like inflation or growth expectations. As the latter indicators and their inner
changeability add additional uncertainty -and therefore risk- to a portfolio, it is wise to diversify across
counties and sectors in for this long-term securities. Then one will be able to profit from a steepened yield
that is the result from a widening in the difference between short- and long-term Treasury yields. This will
probably occur in some markets such as the US, UK, India or Thailand that are anticipating higher
inflation and economic growth. This will probably increase the demand for long-term funds, raising yields
at the long end of the curve.
The crystal clear benefit of long-term bond is that longer maturities yield more and therefore will work
towards our objective of beating our benchmark and achieving 5% profits. Because of the inner
macroeconomic uncertainty in longer maturities we have decided to diversify across geographies.
We have carefully picked countries that have high growth expectations and relative political stability. That
is why we selected long term government bonds in Thailand, India and Morocco and a Santander
Mexico corporate bond
! By following such strategy we will be achieving objectives (2) and (3) of our fixed income
portfolio
c) Other bets that could bring additional returns
Greek government bond
In a context of historically low interest rates for a continuous period, it has become a real challenge to
find assets with significant yield. These that do have high yield represent unaffordable risks such as certain
high yield corporate bonds or other sovereign bonds such as Argentina and Venezuela.
While being in the same context as other countries in the verge of bankruptcy, Greece is different. Its
financial situation has been extremely harm over the past years due to macroeconomic imbalances related
to public budget and others, however, it has profited from its alliances with the European Union in order
to overcome the setbacks of the global financial crisis. Greece has needed, and has obtained, two bailouts
from the Eurozone members in order to not default over its sovereign bondholders. This is the result of
changing dynamics at the European Union level. While initially, this was thought to be a economic and
political alliance where no assumption of third party debt was legally allowed, recent changes in its
institutional structured have pushed in the opposite direction (European Stability Mechanism). In recent
times we have seen how the creation of institutions such as the European Stability Mechanism or even
the European Financial Stability Facility have helped European Union Member States to collaborate with
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each other on a financial basis. As a result Greece has received financial assistance from its peers on two
occasions and has recently been awarded an augmented deadline on its debt in January 2015 from the
European Union. The important factor to consider while investing in Greek sovereign bonds is to
understand the implications of those recent developments: the European Union has pushed towards a
tighter union and has backed away conspiracies about the Eurozone breaking apart. The precedents that
have been established enable us to assume that anything will be done for a Member State not default on
its debt in the future, as this will have an extremely negative effect on the Eurozone economy as a whole
and especially on the Euro currency. As such, Member States are incentivized to carry out internal
bailouts of countries in difficulties rather than letting them default. With this setting in mind, the Greek
10 year bond represents the perfect investments. The higher country risk pushes yields to higher basis
points while the membership to the European Union ascertain that the bond will not default. It is a great
solution in order to obtain safer higher yields than average.
We have decided to choose the 10 yr bond since it is an open of the most liquids bonds and our client
have a specific preference for liquid securities. In order to compensate for the lower liquidity of our
second bet(RMBS) we though it will be a good idea to counterbalance the later with a more liquid
security. Moreover the 10 yr bond duration (7,3) was the one that adjusted the better to our portfolio
targeted duration of 8 yr.
! By following such strategy we will be achieving objective (1) (2) (3) of our fixed income
portfolio
UKNC euro denominated ABS
Prices in the EABS market are rising because of a higher demand than supply following the ECB plan on
ABS acquisitions. In the UK rates are expected to rise and mortgage prepayments are consecuently about
to increases in the UK ABS arena. In the UK the UKNC ( UK Non Conforming) ABS offer the highest
yield for ABS with similar ratings.
It is interesting to look at UKNC euro denominated ABS that are at the same time protected from a
potential decrease in prices derived from increasing rates in the UK and can profit from the increasing
ABS prices in the rest of the EU and high prepayments of the collateral made of guilt linked mortgages.
The series RMAC 2006 have recently being upgraded by Moodys; they have a great excess spread and
still have a substantial portion of their reserve fund. By taking the higher tranche of the mezzanine
(RMAC 2006 NS3X MC1) we are at the same time opening the door for substantial profitability and
protecting ourselves from the potential delinquencies that can appear in an environment of increasing
affordability pressures for consumers.
! By following such strategy we will be achieving objective (1) (2) (3) of our fixed income
portfolio
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C- Benchmark
It follows all the required qualities a benchmark has to follow:
Unambiguous and transparent: The benchmark has a clear inclusion criteria and methodology
for security-weighting.
Investable: Investors are able to replicate the benchmark portfolio since its constituent securities
are liquid and suffer a low level of turnover.
Appropriate and representative: The benchmark reflects our risk tolerance and matches our
investment style. The desired benchmark for our portfolio had to be one with a similar investment
strategy and risk profile. That is why we selected the Deutsche X-trackers High Yield Corporate
Bond (HYIF). This index looks for high-yield exposure, but at the same time, dials down the
interest rate risk in its portfolio. As our portfolio does with its barbell philosophy and its exposure
to Proshares short 7-10 yr, the HYIF tries to position their bond portfolio in anticipation of rising
rates may consider HYIH. Also, Both the index and the portfolio have their largest exposure in
the US and a smaller portion in other countries.
Similar returns: The benchmark yield to worse is 4.9% which is very close to the 5% average
investment we want to obtain with our portfolio
Measurable: The benchmark offers daily pricing and available of historical risk and return data
are required
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APPENDIX PART V
Annex 1: Additional & detailed information on selected assets for the portfolio
INDIA%GOV%10%YR%TREASURY
Price
%.of.total.portfolio
Quality
Maturity
INR.....104,12
6%
/BBBD
28/07/24
Coupon
YTM
Duration.
Convexity
8,40%
7,769%
6,382
0,533
Strategic.use:
With.the.latest.political.developments,.India.has.become.one.of.the.stronges.Emerging.
Markets.in.Asia..Economic.reform.is.on.its.way.and,.together.with..great.demographic.
outlooks,.India.is.expected.to.be.one.of.the.countries.with.higher.growth.in.the.coming.
years..By.longing.the.10.year.sovereign.bond.we.are.gaining.exposure.to.this.growth.
market.
BARCLAYS%INVESTMENT%GRADE%FLOATING%RATE
Price
Quality
Maturity
$............31,56
6%
BBBD/Baa3/BBBD
D
Coupon
YTM
Duration.
Convexity
D
D
D
D
Fund.Manager
Thomas.Connelley
Christopher.DiStefano
Strategic.use:
In.paralel.with.PROSHARES.SHORT.7D10.YR.TREASURY.Index,.this.specific.asset.is.also.
designed.to.hedge.our.investment.against.interest.rate.increases..By.gaining.exposure.to.a.
floating.rate.assets,.if.the.inflation.goes.up.our.real.return.will.remain.stable..Knowing.that.
inflation.tends.to.increase.with.increases.in.interest.rates,.this.asset.allow.us.to.mantain.a.
good.level.of.profitability.in.the.event.of.interest.rate.hikes.
HELLENIC%REPUBLIC%OF%GREECE
Price
Quality
Maturity
............57,47
6%
BD/B
24/02/25
Coupon
YTM
Duration.
Convexity
3,00%
10,560%
7,377
0,68
Strategic.use:
Bestinver's.specialty.is.the.European.Union.market..This.is.why.we.always.include.a.
signature.investment.with.high.confidence.and.pride..While.some.investors.are.bearish.on.
the.European.union.economy.and.the.continuity.of.the.Euro,.we.strongly.beleive.the.
oposit..WIth.the.third.rescue.package.to.Greece,.the.Euro.zone.has.made.a.clear.stand.in.
favor.of.coopeartion.and.solidarity.amongst.Member.States..This.is.why.we.perceive.
Greek.bonds.as.very.attractive,.since.they.offer.high.yileds.while.implicitely.being.backed.
by.all.the.Member.States.in.the.European.Union,.enjoy!
BANCO%SANTANDER%MEXICO
Price
Quality
Maturity
$..........101,01
5%
BBB+/A3
09/11/22
Coupon
YTM
Duration.
Convexity
4,13%
3,969%
6,383
0,483
Strategic.use:
This.is.the.perfect.oportunity.to.buy.into.a."dynamic.elephant"..Banco.Santader.is.one.of.
the.large.and.old.players.of.the.finance.world,.it.represents.stability,.regular.cashflows.and.
a.global.infrastructure.to.leverage.upon..At.the.same.time,.Banco.Santader's.presence.in.
Mexico.is.more.recent.and.still.enjoys.high.level.of.flexibility.and.growth.potential..
Additionally,.the.financial.landscape.in.Mexico.is.still.growing.with.a.strong.middle.class.
willing.to.save.and.a.competitve.context.for.clients..We.beleive.that.Standarder.Mexico.
has.chance.to.gin.this.battle.and.this.market.
18!
!
!
!
!
PROSAHARES(ETF
Price
%+of+total+portfolio
Quality
Maturity
$++++++++++++29,55
60%
BBB1/Baa3
1
Coupon
YTM
Duration+
Convexity
1
1
1
1
Fund+Manager
Michel+Liu
Strategic+use:
During+the+last+FED+meetings,+expectation+for+an+increase+in+interest+rates+have+been+deeply+
established.+While+price+of+bonds+decrease+when+interest+rates+increases,+this+ETF+
synthetically+replicates+a+short+position+on+the+Barclays+U.S.+7110+Year+Treasury+Bond+Index.+
Therefore+this+fund+is+expected+to+yield+hihgly+positive+results+once+interest+rate+start+to+
increase+during+the+coming+years.+This+strategy+is+theoretically+hedge+since+interests+rates+are+
at+technically+the+lowest+they+can+get,+and+thus+eliminating+the+risk+of+relevant+bond+price+
increase+in+the+forseeable+future.+This+ETF+has+a+negative+duration.
MOROCO(10(YR(TREASURY
Price
Quality
Maturity
++++++++++108,41
5%
BBB1/BBB1
19/06/24
Coupon
YTM
Duration+
Convexity
3,5%
2,470%
8
0,734
Strategic+use:
According+to+IMF+data+the+economy+is+strengthening,+with+growth+forecast+at+4.4+percent+in+
2015
and+a+significant+reduction+in+fiscal+and+external+vulnerabilities+is+expected.+This+will+improve+
business+climate,+infrastructure,+education+and+access+to+credit.+We+wish+to+be+exposed+to+
this+growth+market+as+we+expect+demand+for+this+asset+to+increase+in+the+coming+years.+Our+
strategy+seeks+capital+gains+derived+from+increased+in+the+demand+for+this+assets+which+will+
results+in+lower+yields+and+higher+prices.
RMAC(SECURITIES(PLC
Price
Quality
Maturity
++++++++++++91,08
6%
AA/BBB/A2
1
Coupon
YTM
Duration+
Convexity
0,80%
2,527%
8,6
0
Strategic+use:
Quantitative+Easing+has+started+a+few+weeks+ago+in+the+European+Union,+this+has+put+pressure+on+
the+demand+for+Asset+Back+Securities+which+are+an+essential+part+of+the+ECB+buying+apetite.+While+
the+central+bank+is+purchasing+ABS,+the+market+continous+to+demand+the+same+amount+of+those+
assets,+increasing+demand+and+therefore+increasing+the+price+of+ABS.+This+trend+is+at+a+very+early+
stage+and+we+beleive+we+could+profit+by+buying+in+promptly+into+the+market.+Additionally,+this+
specific+ABS+is+Euro+denominated+but+contains+UK+mortgages,+the+best+of+both+worlds:+while+the+
quality+of+the+assets+is+at+UK+standards,+the+gains+are+also+realize+with+the+currency+fluctuations.
THAILAND(10(YR(TREASURY
Price
Quality
Maturity
Strategic+use:
THB+++++110,56
6%
A1/Baa1
12/12/25
Coupon
YTM
Duration+
Convexity
3,85%
2,708%
8,778
0,911
A+long+position+in+a+10+year+Treasury+bill+of+Thailand+will+allow+us+gain+exposure+to+this+country+
full+of+potential.+On+the+verge+of+social+unrest+and+political+uncertainity,+Thailand+has+
managed+correctly+to+find+a+solution+to+its+economic+problems.+The+high+country+risk+allow+us+
to+obtain+a+higher+yield+than+average+on+this+asset+class,+and+we+do+beleive+that+Thailand+will+
experience+great+economic+upsides+in+collaboration+with+other+Asian+economies+such+as+
Singapore+and+India.
19!
RMAC 2006 NS3X M1C, The best of both worlds

Recommendation:,BUY
I- Euro denominated ABS outlook
Price
Coupon
WAL
Issuer
Current Yield
91,0781
0,272%
3.2yr
RMAC Sc
2,29%
The ECBs planning to stimulate Europes economy by buying ABS that started in November is
now showing signs of working. In fact, average prices for EABS are at 98.2 near the highest since
October 2007 and are expected to continue increasing. This is because demand is increasing in a
market where there is lack of supply because of the little issuance in the past 5 years derived from
cheaper ways of financing (eg.LTROS) and low credit origination volumes. This resulted in a 40%
contraction of the EABS market since 2010 ( issuance averaged 77 bn/yr in the past 5 years, down
from 524 bn/yr on 2006)
Coupon Freq
Quarterly
II- UK Mortgage market outlook
12/12/06
No*
The UK housing market has seen a great increase in activity due to economic recovery, increasing
consumer confidence, low interest rates and government schemes such as the BTL program.
Driven by stabilising house prices and low interest rates, market-wide arrears have continuously
improved from 2.5% in 2009 to around 1.8% at year-end 2014. (table 1 & 2). Rating agency Fitch
expects this trend to continue during 2015, stimulated by further economic growth and housing
market recovery. However, house price inflation coupled with a possible base rate rise in the
upcoming year remain key risks for the medium term mortgage market and its borrowers. UK
mortgage portfolios function on a predominantly variable rate and therefore are highly sensitive to
base rate rises. We will focus in this analysis on UKNC loan that is one that does not conform to
high street bank lending standards (table 2)
1st Coupon Date

Callable
*Cleanup call when the principal will be

reduced to less than 10%
Rating Outlook: stable or !
Moodys: A2, Fitch: AA, S&P:

BBB
Analysts: Ana M Valls
(ana.mv@bestinver.com) & Eric
Cuevas G(eric.cg@bestinver.com)
III- A favorable macro environment for the eurodenominated UK Non Conforming ABS
UK: Although conditions are, at present, prosperous for the mortgage market in the UK its constituents will continue to be challenged
by inherent volatility. The possibility of an approaching base rate rise -having inflation approching its 2% target- will doubtless have an
effect on the current demand for mortgages and create further affordability pressures for consumers. We expect rates to increase in Q1
2006 in a gradual and limited manner (by 25bp per Q) meaning that BoE rate may need to stay at low levels for some time.We expect
UKNC borrowers to behave in two ways depending on their curerent status: 1)UKNC are now conforming borrowers that will try to
prepa ypart/all their mortgage at lower interest rates (during the next 6Q) and the ones that fit into the new MMR requirements coudl
lock thei rmortgages in with a fixed rate 2)UKNC continue to be UKNC and may have more delinquencies in an environment of rate
hikes. In the first case CPR will increase and in the second case CDR will increase. These circumstances are favorable for the upper
tranches of the UKNC ABS that will receive both the principal coming from prepayments and the principal coming from delinquencies
that will usually not trigger the more upper tranches.
Rest of the EU: In the EU rates are not expected to rise in the upcoming years that is why eur odenominated senior UKNC ABS have
the best of both worlds: they will also be receiving cashflows fro the CPR and the CDR of their guilt linked collateral but they will not
be exposed to the decreasing prices that will follow an increase on BoE rates.
IV-Opportunities in the RMAC 2006 NS3X
Graph 1: Historical CDR%
The RMAC 2006 NS3X serieshave been a well performing ABS

because of its wide reserve found, their excess spread and their
good BNY trustee. Its senior tranches represent now 49% of the
outstanding amount and are highly interesting since they will be the
ones receinving the greater principal in the upcoming quarters due
to the pro rata structure of the security's payment. However the
more senior tranches are GBP denominated and could be exposed
to a decrease in price due to the negative convexity of the product
and the upcoming BoE rate hikes expected begining of 2006. We
belive that there is great value in the upper mezzanine, euro
denominated tranche of the RMAC 2006 NS3 because of its past
performance (see graph 1) and the recently rating upgrades to the
RMAC series of RMBS. Furthermore we strong belive that
Increasing prepayments in the UKNC market (3M CPR%)
delinquencies will not trigger our selected tranche.
Reasons to buy
We expect rates of the ECB to remain constant at least for the
upcoming 3.5 yr. More principal will come in the short term and
the money we will receive in 3.5 years will be reivested in other
valuable securities. Our bond duration in 4.3 and will be going
down whith the growing prepayment rate that will take place when
rates will start rising in the UK. We will then be having the best of
both worlds.
RMAC 2006 NS3X M1C, The best of both worlds
Table 1: Macroeconomic data affecting the mortgage market
Table 2: UK lenders profiles and housing prices
Table 3: Non conforming Loans
!
!
!
!
Annex 2: Detailed asset allocation per geography, industry and rating
Industry!
Government!Bond!
Corporate!
ABS!
7%!
13%!
80%!
Ratings!
BBBN!
5%!
6%!
BBB!
BBB+!
A!
6%!
83%!
Countries!
US!
Greece!
Morocco!
6%!
7%!
India!
Thailand!
Mexico!
5%!
5%!
7%!
70%!
20!
!
!
!
!
Portfolio built onto Bloomberg
21!
!
!
!
!
Porfolio Analysis on Bloomberg against the Benchmark DB X-TRACKERS
Portfolio Characteristics Analysis
22!
!
!
!
!
Portfolio Analysis against Benchmark
Tracking Error of Portfolio & Benchmark
23!
FIXED(INCOME(PORTFOLIO(PROPOSAL
1
2
3
4
5
6
7
8
BLOOMBERG(TICKER
NAME/ISSUER
TYPE
IGB%8,4
PROSHARES%SHORT%7;10%YR%TREASURY
FLRN
MOROC%3%1/2
GGB%3
RMACS%2006;NS3X%M1C
BSANTM%4%1/8
THAIGB
INDIA%GOV%10%YR%TREASURY
PROSAHARES%ETF
BARCLAYS%INVESTMENT%GRADE%FLOATING%RATE
MOROCO%10%YR%TREASURY
HELLENIC%REPUBLIC%OF%GREECE
RMAC%SECURITIES%PLC
BANCO%SANTANDER%MEXICO
THAILAND%10%YR%TREASURY
EM%SOVEREIGN%BOND
ETF
ETF
EM%SOVEREIGN%BOND
SOVEREIGN%BOND
ABS
CORPORATE%BOND
EM%SOVEREIGN%BOND
WEIGHT PRICE
6%
60%
6%
5%
6%
6%
5%
6%
INR%%%%104,12
$%%%%%%%%%%%29,55
$%%%%%%%%%%%31,56
%%%%%%%%108,41
%%%%%%%%%%%57,47
%%%%%%%%%%%91,08
$%%%%%%%%%101,01
THB%%%110,56
CURRENCY
INR
USD
USD
EUR
EUR
EUR
USD
THB
COUPON
8,40%
;
;
3,5%
3,00%
0,80%
4,13%
3,85%
AGGREGATE(PORTFOLIO(MEASUREMENT
MEDIAN
MEAN
WEIGHTED
COUPON
3,85%
2,96%
1,34%
DURATION
7,54%
5,65
F
CONVEXITY
0,61%
0,41
F
YTM
3,34%
3,75%
1,74%
QUALITY
BBB
TIME(FRAME
QUALITY
MATURITY
SEMIANNUAL
/BBB;
;
BBB;/Baa3
;
BBB;/Baa3/BBB;
ANNUAL
BBB;/BBB;
SEMIANNUAL
B;/B
MONTHLY
AA/BBB/A2
SEMIANNUAL
BBB+/A3
SEMIANNUAL
A;/Baa1
28/07/24
;
;
19/06/24
24/02/25
;
09/11/22
12/12/25
DURATION
6,382
7,9
;
8
7,377
8,6
6,383
8,778
CONVEXITY YTM
0,533
;
;
0,734
0,68
;0,1
0,483
0,911
7,769%
;
;
2,470%
10,560%
2,527%
3,969%
2,708%
CALL(PROVISIONS FUND(MANAGERS
;
;
;
;
;
;
;
;
Michel%Liu
Thomas%Connelley,%Christopher%DiStefano
!
!
!
!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
VII- Other formalities
Client Engagement Letter
Seekinver
Ana Martinez-Vallls & Eric Cuevas
72 Windsor Road
Brookline MA 02445
As of March 26th 2015
Mr. Benjamin Luippold
Babson College
Dear Mr. Benjamin Luippold,
Thank you for the opportunity to meet with you. We welcome the opportunity to work with you as your financial
planner. This engagement letter outlines the specific terms of the financial planning engagement between:
SEEKINVER & Mr. Benjamin Luippold
If the scope or terms of the financial planning engagement change, they should be documented in writing and
mutually agreed upon by all parties to the engagement.
Please be assured that all information that you provide will be kept strictly confidential.
As discussed during our introductory meeting, this engagement will include all services required to develop a fixed
income and an equity investment portfolio. These services will specifically include:
Reviewing and prioritizing your goals and objectives.
Developing an action plan to implement the agreed upon recommendations.
Developing a summary of your current investment desires and ideas

Reviewing your current investment preferences and developing an asset management strategy.
Developing a financial management strategy, including financial projections and analysis.
Explaining Seekinvers market outlook and predictions
Presenting a written financial plan that will be reviewed in detail with you. It will contain recommendations
designed to meet your stated goals and objectives, supported by relevant financial summaries.
25!
!
!
!
!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Explanation of our strategies and methodology to follow while investing.
A detail explanation of the portfolio allocation, its asset types and its individual securities, providing a
comprehensive view of each individual asset characteristics.
Assisting you with the implementation of the financial plan.
Determining necessity to revise your financial plan.
This will be an on-going professional relationship. At a minimum, we will meet on a trimestral basis to ensure the
plan is still appropriate for you. Either party may terminate this agreement by notifying the other in writing.
Our services are free of charge and we highly appreciate your good disposition to allow us to collaborate with you.
This includes development and delivery of your financial plan, unlimited email communication and review meetings
when needed.
In order to ensure that the financial plan contains sound and appropriate recommendations, it is your responsibility
to provide complete and accurate information regarding pertinent aspects of your personal and financial situation
including objectives, needs and values. This list is not all-inclusive and any other relevant information should be
disclosed in a timely manner if deemed appropriate by you. It is your responsibility to ensure that any material
changes to the above noted circumstances are disclosed to us as your financial planner on a timely basis since they
could impact the financial planning recommendations.
We have no known conflicts of interest in the acceptance of this engagement. We commit that we will advise you
of any conflicts of interest, in writing, if they should arise.
We acknowledge our responsibility to adhere to all applicable federal and state rules and regulations regarding
financial advisory. At all times during this engagement, we shall place your interests ahead of our own when
providing professional services.
We look forward to working with you and helping you reach your financial goals.
Sincerely,
Seekinver
26!
!
!
!
!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Client:
I accept the terms of this engagement letter.
I accept the terms of this engagement letter.
Performance Report Sample

Investment Objective: Refreshes the aims of the fund and the philosophy of investments
Fund Performance to date: this table shows the historic performance of the fund in percentage terms from the
last 1 month until inception
Total net
return
fund
Total Benchmark return
Total net excess

return
1 month %
2 month%
3 month %
6 month %
1 year %
Since inception %
Fund Highlights: This section is used in order to inform the client of the most relevant updates on the funds
performance, it helps explain the above table with insights and analysis on the reasons behind the good or bad past
performance of the fund.
Market Review: Here we strive to reconsider our opinions on the market and its economic and financial trends.
We offer a fresh view on the upcoming developments of the global markets and we critically analyze the impact of
such events on future investments.
Outlook: In this section we use our expertise and our previous market review in order to extrapolate our opinions
into the future. We strive to provide accurate bets on the future developments of financial markets and anticipate
financial trends from which to profit. Here the client will find a range of recommendations for its future
investments.
Pie charts and graphs: Our performance review will be accompanied by charts and graphs showcasing inter alia,
our current asset allocation depending on asset type, geography, rating, maturity and industry.
Fund statistics: In this section we wish to educate our client in terms of fundamental data about our fund. We will
include essential information about volatility, yield, duration, credit spread etc.
Contact details: Additionally, on the side of the report we will add our contact information with our direct line for
our client to be always in touch with us.
Legal disclosure: We always take care of our clients well being, and as such we value their awareness of our
limitations. With this legal disclosure we want to ensure that our clients know about what to expect and what not to
expect from us as well as from future inference made from past performance data.
27!
!
!
!
!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
!
!
Seekinver!
72!Windsor!Rd,!Brookline!02445!MA!
Ana!Martnez!Valls:!ana.mv@seekinver.com!
Eric!Cuevas!Guerand:!Eric.cv@seekinver.com!!
28!

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!

II- OUTLOOK OF MACROECONOMIC ENVIRONMENT!

III- CLIENT PREFERENCES & PORTFOLIO OBJECTIVE!

IV CLIENT ASSET ALLOCATION!

V- FIXED INCOME PORTFOLIO!

Eric Cuevas is a current exchange student at Babson College,

Ana Martnez-Valls is a current Law and Business student at IE University.

II- Outlook of Macroeconomic environment

Sources & methodology for the macroeconomic analysis

III- Client preferences & portfolio objective

Horizon: Long term

Analysis of portfolio definition & objectives

The objectives for this portfolio are:

To save money for college and for paying a mortgage

To reinvest the rest of the money for future expenses

APPENDIX PART III

2.2 Tolerance to risk test result

2.3 Main questions used to evaluate tolerance to risk

IV Client asset allocation

Data from Portfolio Optimizer www.excel-portfolio-optimization.en.softonic.com.

V- Fixed income Portfolio

RMAC 2006 NS3X M1C, The best of both worlds

I- Euro denominated ABS outlook

II- UK Mortgage market outlook

1st Coupon Date

*Cleanup call when the principal will be

Rating Outlook: stable or !

Moodys: A2, Fitch: AA, S&P:

IV-Opportunities in the RMAC 2006 NS3X

Graph 1: Historical CDR%

The RMAC 2006 NS3X serieshave been a well performing ABS

RMAC 2006 NS3X M1C, The best of both worlds

Table 1: Macroeconomic data affecting the mortgage market

Table 2: UK lenders profiles and housing prices

Table 3: Non conforming Loans

Annex 2: Detailed asset allocation per geography, industry and rating

Portfolio built onto Bloomberg

Porfolio Analysis on Bloomberg against the Benchmark DB X-TRACKERS

Portfolio Characteristics Analysis

Portfolio Analysis against Benchmark

Tracking Error of Portfolio & Benchmark

Reviewing and prioritizing your goals and objectives.

Developing an action plan to implement the agreed upon recommendations.

Developing a summary of your current investment desires and ideas

Explanation of our strategies and methodology to follow while investing.

Assisting you with the implementation of the financial plan.

Determining necessity to revise your financial plan.

I accept the terms of this engagement letter.

Performance Report Sample

Total Benchmark return

Total net excess

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