关于fixed value问题

问题如下：

Rohan Roggen is the founder of a successful business in Europe. Roggen also created the Roggen Family Charitable Foundation (RFCF) to fund projects in perpetuity that will provide clean drinking water in developing countries.

RFCF’s current portfolio is valued at EUR 250 million, with 50% in equities and 50% in fixed income. The portfolio’s equity holdings are in a fund tracking a broad index of EUR-denominated stocks; the fixed-income holdings are in a fund tracking an all-maturity index of EUR- denominated government bonds. Roggen rebalances the foundation’s portfolio every six months.

Roggen hires Michaela Loucks, an investment consultant, to advise on RFCF’s asset allocation and investments. Roggen explains that he wants the foundation to achieve the following objectives:

Ÿ Spend at least 3% of the fund’s beginning value on projects each year in order to satisfy a legal requirement.

Ÿ As part of this annual distribution, spend at least EUR 5 million (inflation-adjusted) each year on projects in emerging countries in Europe.

Ÿ Minimize the likelihood of a decline in the portfolio’s value of more than 10% in any single year.

Loucks recommends that RFCF establish an IPS and globally diversify its portfolio. She discusses with Roggen the asset-only (AO) and asset/liability management (ALM) approaches to setting RFCF’s policy asset allocation.

A. Discuss why each of the following approaches could be appropriate in setting RFCF’s policy asset allocation:

i. AO

ii. ALM

选项：

解释：

i. AO

There are three reasons why AO could be appropriate; only one is needed for credit.

Ÿ RFCF’s minimum spending rate (3% of fund value) is not liability-like because it is stated as a percentage of the fund’s beginning value, so absolute spending is reduced if there is a decline in the portfolio. This contrasts with spending that is based on a fixed amount, which does not fluctuate with portfolio value.

Ÿ Roggen’s desire to limit declines in portfolio value to less than 10% is not related to spending (the liability stream), but rather only to the value of the portfolio.

Ÿ AO would improve the likelihood of the foundation being able to operate in perpetuity because it typically invests more in higher-returning equities.

ii. ALM

The desire to spend at least EUR 5 million (inflation-adjusted) each year supports the use of ALM because this spending is a fixed amount. By considering this minimum spending requirement as a liability, the policy asset allocation can minimize the uncertainty related to funding this requirement. In an AO approach, this liability is ignored or assumed to be zero.