Essay on Partners Healthcare Case Solution

1319 Words Sep 12th, 2014 6 Pages
Partners Healthcare



Executive Summary

Partners Healthcare is considering the introduction of real assets into the organization’s portfolio. The analysis will demonstrate the effects of having one risky asset and one risk-free asset in a portfolio. Our analysis will also show that the introduction of real assets can decrease the risk of the hospital’s portfolio. Each hospital in the healthcare system can determine the appropriate portfolio mix based on their desired expected level of return and risk they are willing to accept.

I. Mixes of STP & LTP
Suppose different hospitals within the Partners system chose different mixes of the “risk-free” STP (short term pool) and the baseline LTP (long term pool), whose future
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The expected return of this portfolio stays the same at 10%, but the volatility is decreased to 9.69%. So volatility is improved by 0.25% with the introduction of REITs.
Exhibit 2c shows the introduction of the other “real-asset”, commodities. From reviewing the curve and the Sharpe ratios for the portfolios presented, with the introduction of commodities the Sharpe ratio can be improved to 1.16; this portfolio would be made up of 19% in US Equities, 29.7% in Foreign Equity, 28% in Bonds, and 23.2% in commodities. The expected return of this portfolio stays the same at 10%, but the volatility is decreased to 8.65%. So volatility is improved by 1.29% with the introduction of commodities.
Exhibit 2d shows the introduction of both “real-assets” REITs and commodities. From reviewing the curve and the Sharpe ratios for the portfolios presented, with the introduction of both real assets the Sharpe ratio can be improved to 1.18; this portfolio would be made up of 14.3% in US Equities, 27.5% in Foreign Equity, 22.2% in Bonds, 13.8% in REITs, and 22.3% in commodities. The expected return of this portfolio stays the same at 10%, but the volatility is further decreased to 8.49%. So volatility is improved by 1.45% with the introduction of…

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