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Feeling · 2022年08月29日

为什么不选allocation 2

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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.
Maglav outsources the management of the pension plan entirely to Westcome Investments. The fee structure requires Maglav to compensate Westcome with a high base fee regardless of performance. Boulder tells Azarov that outsourcing offers small institutional investors, such as Maglav’s pension plan, the following three benefits:

  • 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.
In the meeting with Maglav, Azarov describes the investment approach used by Westcome in managing the pension plan. The approach is characterized by a high allocation to alternative investments, significant active management, and a reliance on outsourcing assets to other external asset managers. Azarov also explains that Maglav’s operating results have a low correlation with pension asset returns and that the investment strategy is affected by the fact that the pension fund assets are a small portion of Maglav’s market capitalization. Azarov states that the plan is subject to the Employee Retirement Income Security Act of 1974 (ERISA) and follows generally accepted accounting principles, including Accounting Standards Codification (ASC) 715, Compensation—Retirement 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.
The Fund has a small investment staff with limited experience in managing alternative assets and currently uses the Norway model for its investment approach. Azarov suggests a change in investment approach by making an allocation to externally man-aged alternative assets—namely, hedge funds and private equity. Ten-year nominal expected return assumptions for various asset classes, as well as three proposed allocations that include some allocation to alternative assets, are presented in Exhibit 1.


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

B.

Allocation 2

C.

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。

1 个答案
已采纳答案

lynn_品职助教 · 2022年08月29日

嗨,从没放弃的小努力你好:


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。

哪怕是可以用外包解决alt的问题,成本依然是有的。


Alternative assets更难打理,所以在收益一样的情况下,能少投就少投

Alternative更难打理主要体现在:

投资Alternative需要具备的专业知识、要求较高,所以如果是Internally managed,需要具备投资的水平,需要具有Highly-skilled employees,小基金很难达到;

即便是外包,也需要具备筛选外部基金经理的能力;同时,Top-ranked的Alternative基金经理和Low-skilled的Alternative基金经理,他们带来的收益差距太大了;

即便是外包,一般小资金的Fund,也很难找到Top-skilled的Alternative基金经理帮他们打理;

下面是原文:

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.

----------------------------------------------
努力的时光都是限量版,加油!

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NO.PZ201910090100002107 问题如下 Whiproposeallocation in Exhibit 1 woulmost appropriate for the Fungiven its characteristics? A.Allocation 1 B.Allocation 2 C.Allocation 3 C is correct.Allocation 3 is the most appropriate allocation for the Fun The annuexpectereturns for the three allocations are 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 rereturn for Allocation 1 is 3.07% (= 5.57% – 2.50%), anthe rereturn for Allocation 2 anAllocation 3 is 4.21% (= 6.71% – 2.50%).Therefore, Allocation 1 is not appropriate because the expectererate of return is less ththe annuspenng rate of 4%. With expectespenng 4%, the purchasing power of the Funwoulexpecteto cline over time with Allocation 1.Allocations 2 an3 both offer expectererate of return greater ththe annuspenng rate of 4%. Thus, the purchasing power of the Funwoulexpecteto grow over time with either allocation. However, Allocation 3 is more appropriate thAllocation 2 because of its lower allocation to alternative assets (hee fun anprivate equity). The tot60% allocation to alternative assets in Allocation 2 is well above the 15% allocation in Allocation 3 anis likely too high consiring the Funs small investment staff anits limiteexperienwith managing alternative investments. Also, given the Funs relatively small size of assets unr management ($200 million), access to top hee fun anprivate equity managers is likely to limite 如果计算的allocation 2 expectereturn略高于allocation 3,我们在return和allocation to alternatives中,如何balance,如何选择?

2023-03-12 11:18 1 · 回答