A foundation has $ 1 billion under AUM and the current asset allocation is 40% US Equities, 40% US Treasuries , 10% Investment- Grade non US bonds and 10% is cash. They have a small investment. They wish to change the asset allocation and three choices are
| Asset Class | Asset Mix I | Asset Mix II | Asset Mix III |
|---|---|---|---|
| Cash* | 5% | 5% | 4% |
| US equities | 20% | 40% | 30% |
| Global (Non-US) equities | 10% | 35% | 40% |
| US Treasuries | 5% | 10% | 10% |
| Non-US developed markets bonds | 5% | 10% | nil |
| HF and PE | 55% | 0 | 16% |
| Volatility | 16% | 16% | 16% |
I think asset 1 is the right mix however the answer states asset mix 3 is appropriate because Asset 1 mix is a far stretch from the current IPS and because asset mix 1 invests 55% in HF which the team may not be able to fulfill because of its small size
I just wanted to verify if the justification provided is accurate. The fund in question has 1 billion AUM which means they can invest around 50% assets in AI. Does the tam size rally matter in such questions because they can always outsource it? And secondly is it detrimental if the suggested policy is a far stretch from the current IPS
