INVESTMENT POLICY STATEMENT: MRS. LAURA MENDES

The investment policy statement (IPS) developed in this Master Final Work (MFW) intends to manage an inheritance of €500,000 for Mrs. Laura Mendes, a Senior Public Health Analyst from Portugal, to support her daughter Sofia’s future education and lifestyle costs. The planned investment horizon is 12 years, during which the portfolio aims to achieve a real target value of €1,141,783 which entails a real annual return of 7.13%. To achieve this objective the IPS uses a strategic equity and bond allocation split of 60/40 and a balanced capital preservation alongside long-term growth. Defensive sectors are mainly used for equities such as consumer staples, healthcare, utilities alongside financials and industrials with Eurozone bias to reduce currency risk. Fixed income securities include sovereign bonds from the Eurozone and U.S. government bonds which enhance stability for portfolio resilience. The volatility and expected return were obtained using the Modern Portfolio Theory (MPT), based on historical asset-level performance (2010–2025), and validated through an efficient frontier analysis. Risk-adjusted metrics like the Sharpe and Sortino ratios confirm the portfolio’s alignment with the client’s moderate risk tolerance. Performance is further evaluated using Monte Carlo simulation and historical back testing under four market stress scenarios, making sure that there is resilience across different macroeconomic conditions. Risk is assessed using Value at Risk (VaR) methodologies and sensitivity analysis. This approach shows the practical application of financial theory in portfolio construction, in line with CFA principles.