NO.PZ201910090100002107
问题如下:
William Azarov is a portfolio manager for Westcome Investments, an asset management firm. Azarov is preparing for meetings with two of Westcome’s clients and obtains the help of Jason Boulder, a junior analyst. The first meeting is with Maglav Inc., a rapidly growing US-based technology firm with a young workforce and high employee turnover. Azarov directs Boulder to review the details of Maglav’s defined benefit (DB) pension plan. The plan is overfunded and has assets under management of $25 million. Boulder makes the following two observations:
- Observation 1 Maglav’s shareholders benefit from the plan’s overfunded status.
- Observation 2 The funded ratio of Maglav’s plan will decrease if employee turnover decreases.
- Benefit 1: Regulatory requirements are reduced.
- Benefit 2: Conflicts of interest are eliminated from principal–agent issues.
- Benefit 3: Investors have access to a wider range of investment strategies through scale benefits.
Azarov’s second meeting is with John Spintop, chief investment officer of the Wolf University Endowment Fund (the Fund). Spintop hired Westcome to assist in developing a new investment policy to present to the Fund’s board of directors. The Fund, which has assets under management of $200 million, has an overall objective of maintaining long-term purchasing power while providing needed financial support to Wolf University. During the meeting, Spintop states that the Fund has an annual spending policy of paying out 4% of the Fund’s three-year rolling asset value to Wolf University, and the Fund’s risk tolerance should consider the following three liability characteristics:
- Characteristic 1 The Fund has easy access to debt markets.
- Characteristic 2 The Fund supports 10% of Wolf University’s annual budget.
- Characteristic 3 The Fund receives significant annual inflows from gifts and donations.
Expected inflation for the next 10 years is 2.5% annually.
Which proposed allocation in Exhibit 1 would be most appropriate for the Fund given its characteristics?
选项:
A.Allocation 1
Allocation 2
Allocation 3
解释:
C is correct.
Allocation 3 is the most appropriate allocation for the Fund. The annual expected returns for the three allocations are as follows:
Allocation 1 exp. return = (0.45 × 4.1%) + (0.40 × 6.3%) + (0.10 × 7.5%) + (0.05 × 9.1%)= 5.57%.
Allocation 2 exp. return = (0.10 × 4.1%) + (0.15 × 6.3%) + (0.15 × 7.5%) + (0.30 × 5.0%) + (0.30 × 9.1%)= 6.71%.
Allocation 3 exp. return = (0.13 × 4.1%) + (0.32 × 6.3%) + (0.40 × 7.5%) + (0.05 × 5.0%) + (0.10 × 9.1%)= 6.71%.
The real return for Allocation 1 is 3.07% (= 5.57% – 2.50%), and the real return for Allocation 2 and Allocation 3 is 4.21% (= 6.71% – 2.50%).
Therefore, Allocation 1 is not appropriate because the expected real rate of return is less than the annual spending rate of 4%. With expected spending at 4%, the purchasing power of the Fund would be expected to decline over time with Allocation 1.
Allocations 2 and 3 both offer an expected real rate of return greater than the annual spending rate of 4%. Thus, the purchasing power of the Fund would be expected to grow over time with either allocation. However, Allocation 3 is more appropriate than Allocation 2 because of its lower allocation to alternative assets (hedge funds and private equity). The total 60% allocation to alternative assets in Allocation 2 is well above the 15% allocation in Allocation 3 and is likely too high considering the Fund’s small investment staff and its limited experience with managing alternative investments. Also, given the Fund’s relatively small size of assets under management ($200 million), access to top hedge funds and private equity managers is likely to be limited.
正是因为The Fund has a small investment staff with limited experience in managing alternative assets且用的是norway model。所以Azarov才推荐更多的配置alts。且the fund可以参与debt市场,又只支持10%的spending,还收到很多donation。所以liquidity need低,更加能多投alts呀。