Asset Allocation Of Charity X Essay

2437 Words Jun 15th, 2015 10 Pages
The following report and its contents outline the asset allocation of charity X to be submitted on 25th May 2015.
Strategy Overview
A balanced asset allocation has been formulated with Australian and US equities, as well as cash and government bonds. This medium-term investment strategy will generate the best possible (while conservative) rate of return.
In order to ensure that we achieve a well-diversified allocation in terms of securities and global market exposure, we have imposed a number of restrictions. These restrictions are:
1. No single asset should contain more than 10% of the portfolio as declared by the board of directors.
2. Total investment in Australian equities must not exceed more than 35% of all investments;
3. Total investment in US equities must not exceed more than 35% of all investments;
4. Maximum exposure to Australian Government bonds must not exceed 30% of the portfolio;
5. No cash borrowing.
Stock Selection Criteria
1. Large market capitalization stocks (ASX 50 & Dow Jones 30);
2. Leading stock within its sector;
3. Low correlation;
4. Profitable; and
5. Dividend paying stocks. Australian Government bonds are considered a low risk asset. There is yield risk as well as default risk – albeit small. That being said, in an arbitrage-free market, there is only one risk-free asset that would aid in the creation of a conservative portfolio - considering lower default risk, a cash investment is also to be…

Related Documents