City College is a community college with a $100 million endowment. Since its establishment, it has had a fixed investmen
Posted: Tue Nov 23, 2021 8:40 am
City College is a community college with a $100 million
endowment. Since its establishment, it has had a fixed investment
policy of 55% stocks (spread 10/15/30 amongst small, medium and
large cap stock portfolios), 35% bond index fund (VBMFX) and 10%
Equity REITs over the years 2004 – 2020.
Since the role of the endowment in meeting budget needs has
increased dramatically in the past few years, City College decided
to review its past performance and future contributions to the
institution. The school hired your company to assess its current
performance and to recommend an optimal portfolio mix. In
particular, the school feels strongly that 0.8% per month
represented a “floor” below which the portfolio expected return
should not drop and wants you to suggest an efficient asset
allocation to achieve this goal.
Your manager has decided to assign the task to your team. You
are required to address the following questions. For simplicity, we
assume that short sales are allowed (unless explicitly ruled out)
and borrowing at the risk-free rate is possible.
endowment. Since its establishment, it has had a fixed investment
policy of 55% stocks (spread 10/15/30 amongst small, medium and
large cap stock portfolios), 35% bond index fund (VBMFX) and 10%
Equity REITs over the years 2004 – 2020.
Since the role of the endowment in meeting budget needs has
increased dramatically in the past few years, City College decided
to review its past performance and future contributions to the
institution. The school hired your company to assess its current
performance and to recommend an optimal portfolio mix. In
particular, the school feels strongly that 0.8% per month
represented a “floor” below which the portfolio expected return
should not drop and wants you to suggest an efficient asset
allocation to achieve this goal.
Your manager has decided to assign the task to your team. You
are required to address the following questions. For simplicity, we
assume that short sales are allowed (unless explicitly ruled out)
and borrowing at the risk-free rate is possible.