'r'eu have been assigned te censtruct the eptimal pertfelie cemprising twe risky assets [Pertfelies As El} while eerrsidering the client's risk telerance. The attached spread sheet shews histcrical menthly retums cf the twe pertfelies. the SitF' Etltl and Ere-day Treasury Bills. Alse shewn are the annualized retums fer each fer the peried specied. The rst risky asset {Pcttfelie A} is a US equity strategy that uses publically available valuahn. technical and sentiment facters te assess which stecks are everpriced and which are under-priced. Fundamental facters indicate the magnitude and quality ef a eempany's earnings and the strength ef its balance sheeL Examples ef such facters include: cash flew grewth. cash ew return en invested capital. price re cash ew. and accruals which assess earnings quality [few quality earnings indicate that management may be manipulating earnings by adjusting accruals}. Cempanies with faverable fundamental facters tend te eutperferm these with less faverable facters. Technical and sentiment facters seek te identify mispricings resulting frem invester behavlcr. Examples include: mementum and price reversals where investers tend te ever-react te geed and bad news; shert interest en a stack which can indicate the invester sentiment abeut the cempany's prespects: share buybacks which can indicate a pesilive signal frem management's eptimism regarding a rm's frrture prespects'. and earnings f revenue surprise. Firms witfr faverable technical and sentiment facters alse tend te eutperferm. Fer example. rms whese earnings and revenue exceed analysts\" expectaiiens tend te centinue te eutperferm vs. these rms 'd'tat experience earnings surprise due te cest cutting. Starting with the market pertfelie. the US equity strategy ever-weights these steclrs with mere faverable fundamental. technical and sentiment facters and under-weights er aveids these sled-ts with lessfaverable er un-faverable facters. The strategy seeks te eutperfcmt the market pertfelie as represented by the SP sec. The n'mnthfy retums cf the US equity strategy are shewn in the attached spreadsheet {Penfelie A}. The seeend risky asset [Pertfelie B] is a glebal macre hedge fund. This strategy seeks te benefit frem mispricings within and acress bread asset classes by taking leng and shert pesttierrs in equity and bend markets and currencies. Fer example. if the manager believes that US equities will etrtperfen'n Japanese equities. the pertfclic will ge leng SP sec futures and shert TDPIK futures [TDPIK is a Japanese eqtu index}. This lengfshrxt trade is net impacted by the everall directien ef glebal equities. but rather the relative mcvement between US and Japanese equities. Similarly fer bends. if the manager believes that interest rates in the United Hingdem [UK] will decline mere se than interest rates in Australia. then the manager will buy UH gilt futures [gift is the 1D- year LJlt'. bend} and shert Australian lityear bend futures. Again. this trade is net impacted by the everall directien ef glebal interest rates. bttt rather the relative mevemem between Lift. and Australian rates. Recall that bend prices rise as interest rates decline. The glebal macre hedge fund is mestfy market neutral meaning that leng pesiliens equal shert pcsitlens thereby dramatically reducing systematic expesure [law beta}. Pertfelies As H are much mere velatile titan the risk free rate. 'r'eu will nd that their eerrelaMn is small indicating that there are diversicatien benets te be had helding bath in a pertfelie [I denft shew the cerrelatien. btrt yeu wil need te calculate this using the =cerrel(range 1. rangeE} functien in excel. 'r'bu will be meeting with a cient that is lacking fer investment advice frem yeu based en yeur twe strategies A E B. In preparatmn fer yeur upmming meeting with the elm. yeur bess asks that yeu respend