NO.PZ2023010409000023
问题如下：
The Wolf University Endowment
Fund (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.
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
managed 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.
Exhibit 1 10-Year Nominal Expected Return Assumptions and Proposed Allocations
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?
Justify your response.
选项：
解释：
Allocation 3 is the most appropriate one for the fund. The expected return after inflation of allocation 1 is 3.07%, which is small than the spending rate of 4%. The expected return of allocation 2 and 3 is 4.21% can meet the spending rate. But since the asset size of endowment is small (200 million), so it is inappropriate to invest highly in alternatives. Because the high minimum asset size of alternatives like HF and PE, it faces challenges in building a wider investment universe. And it is hard to access to external top managers in HF and PE spaces. So Allocation 2 is out because of its high allocation in HF and PE.
