QUESTION

The following data is provided: Monthly returns which include those for three assets classes for the six-year period to the end of December 2013.

The Cape Retirement Fund may only invest in the asset classes for which returns have been provided. The Investment Consultants and Trustees of the Fund have indicated that the risk and return requirements of the Fund indicate that exposures (weights) to the asset classes must, at all times, be constrained as follows:

Equities (ALSI) Bonds (ALBI)] Cash (STEFI) Minimum 30% 59% Maximum 75%% 40%% 20%% Also, a composite benchmark, against which the fund will be measured, will be constructed according to the following weights to the asset classes: Equities Total (ALSI) Bonds (ALBI)] Cash (STEFI) exopsure 60%% 30 10% 100%