NO.PZ2022122801000054
问题如下：
Mark DuBord, a financial adviser, works with the Fordhart University Foundation (Fordhart). He meets with the university foundation investment committee annually to review fund objectives and constraints.
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.
RT
