Strategic Capital Management, Essay

1227 Words Mar 15th, 2013 5 Pages
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I. Case background

In this case study, Sarah Wolfe who was the founder and CEO of the Beta Management Group, a small investment management company based in a Boston suburb in 1989, wanted to expand her business in 1991 by changing investment strategy.
II. Sarah Wolfe

Previous investment strategy:

Her company‘s stated goals were to enhance return and reduce risks, so that during first several years she put majority of company’s funds in index funds, account for between 50% to 99%. Because she did not have so much money to invest in other financial instruments and thought index funds was safer, especial Vanguard’s Index 500 Trust, than other financial instruments in 1989. According to the
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Ms Wolfe though these stocks’ prices were quit low and it is a good time to buy them in, since she forecasted market would be going well in 1991. However, the only thing she needed to take into consideration was the high risk level and uncertain return of stocks.
Compare to new and old strategy, Ms Wolfe clearly moved her risk position from neutral risk investor to risk taker investor. This change mainly depended on she though the market of these stocks would be a good performance.
In this case, Ms. Wolfe chooses a different way that investing funds into small and unstable stocks in company’s portfolio to avoid risk of market. So she is a contrarian investor.
III. Background of California R.E.I.T and Brown Group, Inc.

Background of California R.E.I.T

It was a real estate investment trust that made equity and mortgage investments in income-producing properties.
Core business: * Retail building 57% * Industrial 17% * Offices 15% * Apartments 11%
Its investment divided in Arizona (51%), California (30%) and Washington (19%).
Risk factor:
Stock price of California R.E.I.T had been badly damaged by the “World Series” earthquake in 1989. However, no one could avoid this risk under a downward market. Compared with SP500 index funds and Brown Group, its stock price was the lowest reaching to $2.25. Therefore, its main factors are unstable return and high risk.
Stock performance:
Because of the “World

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