NO.PZ201805280100000402
问题如下：
Mark DuBord, a financial adviser, works
with two university foundations, the Titan State Foundation (Titan) and the
Fordhart University Foundation (Fordhart). He meets with each university
foundation investment committee annually to review fund objectives and
constraints.
Titan’s portfolio has a market value of $10
million. After his annual meeting with its investment committee, DuBord notes
the following points:
■ Titan must spend 3% of its beginning-of-the-year
asset value annually to meet legal obligations.
■ The investment committee seeks exposure
to private equity investments and requests DuBord’s review of the Sun-Fin Private
Equity Fund as a potential new investment.
■ A recent declining trend in enrollment is
expected to continue. This is a concern because it has led to a loss of
operating revenue from tuition.
■ Regulatory sanctions and penalties are
likely to result in lower donations over the next five years.
DuBord supervises two junior analysts and instructs one to formulate new allocations for Titan. This analyst proposes the allocation presented in Exhibit 1.
The Fordhart portfolio has a market value
of $2 billion. After his annual meeting
with its investment committee, DuBord notes
the following points:
■ Fordhart must spend 3% of its
beginning-of-the-year asset value annually to meet legal obligations.
■ The investment committee seeks exposure
to private equity investments and requests that DuBord review the CFQ Private
Equity Fund as a potential new investment.
■ Enrollment is strong and growing, leading
to increased operating revenues from tuition.
■ A recent legal settlement eliminated an
annual obligation of $50 million from the portfolio to support a biodigester
used in the university’s Center for Renewable Energy. \
DuBord instructs his second junior analyst
to formulate new allocations for
Fordhart. This analyst proposes the allocation presented in Exhibit 2.
Discuss two reasons why the proposed asset
allocation is inappropriate for Fordhart.
选项：
解释：
The proposed asset allocation for Fordhart
is inappropriate because:
1 Given the increasing enrollment trends
and recent favorable legal settlement, Fordhart will likely require lower
liquidity in the future. The proposed allocation shifts Fordhart’s portfolio
away from risky assets (decreases the relative equity holdings and increases
the relative bond holdings).
2 The proposed 10% allocation to private
equity creates an overly concentrated position in the underlying investment. A
10% allocation to the CFQ Private Equity Fund is $200 million (10% of
Fordhart’s $2 billion). The CFQ Private Equity Fund has assets under management
(AUM) of $500 million. Hence, Fordhart would own 40% of the entire CFQ Private
Equity Fund. This position exposes both Fordhart and the CFQ fund to an
undesirable level of operational risk.
Liquidity and volatility consideration. Enrollment is strong and growing, leading to increased operating revenues from tuition. A recent legal settlement eliminated an annual obligation of $50 million from the portfolio to support a biodigester used in the university’s Center for Renewable Energy. All of those signal indicate the future contribution would increase so lower liquidity and higher volatility is acceptable . However, Fordhart decreased its allocation to Equity fund but increase the allocation to bond funds. It should increase allocation to higher risk asset. It would be inappropriate.
Fordhart is a large foundation which has total asset of $2 billion. Investing 10% of asset to PE fund equals to 0.2 Billions. It would take up to 40% of the total AUM of PE Fund. Such big allocation compare to AUM would have liquidity problem. GP would reluctant to agree on withdraw request for such big allocation. So It would be inappropriate.