The current asset allocation for the endowment fund of the Fantasy University is as follows:

Asset Classes	Cash	Bond	Equity
Weight	9%	69%	22%

The endowment fund is a perpetual fund that provides sc holarship s , research grant s and other research support to the university . The current asset allocation is problematic.

You are the newly employed portfolio manager of this fund. Recently, the university has decided to review the asset allocation of the end owment fund to see if alternative investment opportunities can be explored and non - traditional assets can be included into the portfolio.

Data:

	Cash (%)	Bond Index	Equity Index	Direct Property Index	Listed Property Index	Hedge Funds Index	Commodity Index		Data Sources: Thompson Reuters Datastream
Q4 1995	5.08	191.187	593.26	760.31	1744.5	1980.31	2358.78		Cash: US TREASURY BILL RATE -3 MONTH
Q1 1996	5.15	197.756	656.37	845.87	1887.12	2103.45	2649.02		Bond Index: US BENCHMARK 10 YEAR DS GOVT. TOTAL RETURN INDEX
Q2 1996	5.16	184.576	645.44	836.37	1908.42	2176.34	3148.91		Equity Index: S&P 500 COMPOSITE -TOTAL RETURN INDEX
Q3 1996	5.04	192.323	662.1	863.01	1998.22	2176.77	3131.09		Direct Property: US NCREIF PROPERTY INDEX
Q4 1996	5.15	198.102	730.82	957.91	2175.76	2273.28	3289.91		Listed Property: FTSE/NAREIT ALL EQUITY REITS USD-TOTAL RETURN INDEX
Q1 1997	5.34	199.494	789.56	1039.91	2539.38	2425.45	3341.45		Hedge Fund Index: HFRI FUND OF FUNDS COMPOSITE
Q2 1997	5.17	198.534	824.78	1091.49	2459.21	2455.02	3418.42		Commodity Index: S&P GSCI Commodity Total Return
Q3 1997	5.11	205.823	933.54	1240.74	2736.55	2681.09	3411.34		Sample Period: Quarter 4 1995 to Q2 2018
Q4 1997	5.35	216.069	927.51	1238.2	2888.03	2707.25	3554.71
Q1 1998	5.16	222.935	1010.74	1354.75	3004.15	2695.59	2943
Q2 1998	5.1	223.925	1108.14	1490.48	2908.1	2882.95	2703.16
Q3 1998	4.36	231.745	1089.45	1470.88	2681.98	2834.47	2306.79
Q4 1998	4.47	242.843	1130.2	1532.29	2518.87	2505.76	2226.68
Q1 1999	4.5	245.289	1216.14	1654.24	2435.44	2618.93	1921.42
Q2 1999	4.78	236.803	1345	1835.06	2637.78	2754.48	2262.64
Q3 1999	4.86	228.632	1297.8	1776.68	2466.41	2877.35	2506.06
Q4 1999	5.22	233.936	1365.28	1875.07	2363.52	2913.6	2659.89
Q1 2000	5.88	225.743	1411.7	1944.57	2407.28	3316.34	3022.05
Q2 2000	5.87	229.776	1412.14	1950.5	2661.54	3379.29	3292.27
Q3 2000	6.21	243.488	1472.87	2040.55	2900.79	3412.16	3603.63
Q4 2000	5.89	246.194	1400.14	1945.24	2763.99	3405.29	4068.7
Q1 2001	4.29	261.997	1314.76	1831.96	2970.85	3464.72	4151.438
Q2 2001	3.62	262.118	1255.54	1754.72	3067.48	3447.57	3868.75
Q3 2001	2.37	266.796	1183.43	1659.76	3366.11	3461.57	3590.94
Q4 2001	1.73	284.621	1120.31	1576.61	3222.67	3444.75	3059.61
Q1 2002	1.79	274.818	1096.22	1547.94	3425.4	3510	2791.91
Q2 2002	1.67	271.667	1073.01	1520.39	3696.96	3550.95	3260.22
Q3 2002	1.6	295.238	908.64	1292.94	3533.04	3488	3226.84
Q4 2002	1.19	308.47	894.74	1278.94	3440.4	3476.94	3287.8
Q1 2003	1.09	309.273	829.69	1191.46	3422.5	3559.61	4267.75
Q2 2003	0.84	318.667	933.41	1346.68	3898.29	3614.02	3859.72
Q3 2003	0.93	308.025	977.59	1416.3	4211.78	3722.23	4212.648
Q4 2003	0.91	307.127	1053.21	1533.02	4621.92	3855.71	4235.887
Q1 2004	0.93	320.45	1139.81	1666.16	5159.91	4002.11	4493.52
Q2 2004	1.3	306.623	1098.7	1612.31	4550.35	4028.54	5347.078
Q3 2004	1.68	323.385	1065.22	1569.96	5203.6	3980.02	5489.309
Q4 2004	2.18	327.377	1164.08	1724.08	5905.45	4046.15	5743.477
Q1 2005	2.73	336.979	1191.99	1773.28	6108.6	4209.78	5400.719
Q2 2005	3.06	332.392	1178.84	1760.87	6406.99	4183.48	5907.699
Q3 2005	3.47	332.095	1231.38	1847.76	6779.67	4324.3	6733.156
Q4 2005	3.99	328.529	1220.65	1841	6858.68	4364.01	6602.09
Q1 2006	4.52	333.447	1263.77	1915.1	7583.7	4655.51	6415.5
Q2 2006	4.87	322.109	1325.14	2016.59	8028.05	4835.23	6980.547
Q3 2006	4.77	330.417	1265.95	1936.3	8310.72	4704.66	7199.961
Q4 2006	4.89	341.792	1378.33	2118.32	9082.6	4819.65	5963.91
Q1 2007	4.9	340.949	1438.06	2220.72	10795.29	5060.55	5594.926
Q2 2007	4.68	347.437	1512.58	2346.3	10061.13	5240.69	5723.328
Q3 2007	3.72	347.521	1453.09	2264.5	8925.55	5405.05	5994.086
Q4 2007	3.29	367.101	1453.7	2276.26	8651.67	5567.04	7412.961
Q1 2008	1.36	387.887	1331.29	2095.21	7811.23	5348.36	7596.469
Q2 2008	1.87	387.473	1388.28	2196.54	8697.23	5327.93	9615.148
Q3 2008	0.9	385.763	1296.32	2061.77	8482.37	5231.76	8575.328
Q4 2008	0.11	395.396	930.99	1490.31	5277.29	4515.68	5041.992
Q1 2009	0.21	427.161	869.89	1403.19	4430.03	4361.81	3608.409
Q2 2009	0.19	421.917	929.23	1509.14	4777.42	4392.59	3956.891
Q3 2009	0.14	405.657	1010.48	1650.73	5757.26	4625.84	4362.672
Q4 2009	0.06	421.641	1093.08	1795.56	5984.48	4753.44	4518.996
Q1 2010	0.16	419.622	1070.52	1767.18	6004.11	4809.86	4189.77
Q2 2010	0.18	430.79	1110.88	1842.32	7203.58	4939.95	4211.234
Q3 2010	0.16	456.537	1127.79	1880.06	7740.57	4805.86	4337.578
Q4 2010	0.12	469.287	1213.4	2033.85	8159.52	4997.8	4737.824
Q1 2011	0.09	436.585	1320.88	2224.64	8814.87	5110.43	5040.035
Q2 2011	0.03	458.718	1346.29	2277.3	9266.88	5211.03	5298.164
Q3 2011	0.02	501.645	1172.53	1993.76	8188.38	5107.34	4652.289
Q4 2011	0.02	516.321	1229.1	2102.72	8581.93	4885.66	4987.352
Q1 2012	0.07	517.699	1351.95	2325.56	9742.29	4897.14	5130.848
Q2 2012	0.09	530.364	1354.58	2342.31	10234.74	4960.26	4869.543
Q3 2012	0.1	543.09	1402.8	2440.23	10421.72	4896.05	5023.426
Q4 2012	0.05	551.055	1379.85	2413.92	10342.23	4962.68	4826.152
Q1 2013	0.07	536.222	1517.93	2670.85	11322.17	5148.84	5116.172
Q2 2013	0.04	549.102	1626.67	2878.3	12519.68	5251.81	4760.477
Q3 2013	0.02	516.559	1691.42	3008.79	11453.1	5264.17	4836.328
Q4 2013	0.07	512.425	1770.61	3166.11	11235.33	5365.14	4671.02
Q1 2014	0.05	519.767	1797.02	3229.64	11574.87	5471.47	4849.766
Q2 2014	0.04	528.036	1878.48	3394.05	12701.09	5489.25	4977.266
Q3 2014	0.02	540.95	1931.59	3507.21	12997.91	5589.22	4800.84
Q4 2014	0.04	549.332	2031.92	3708.46	13762.06	5589.59	4156.324
Q1 2015	0.03	569.51	2046.74	3754.36	14827.95	5685.45	3181.166
Q2 2015	0.01	563.888	2116.1	3901.01	14283.73	5834.28	3278.621
Q3 2015	-0.01	565.498	2077.57	3849.96	14140.22	5843.03	2674.265
Q4 2015	0.16	559.291	2078.58	3873.37	14005.03	5669.87	2504.545
Q1 2016	0.21	592.966	1852.21	3470.5	13171.14	5512.48	1888.292
Q2 2016	0.26	596.232	2058.69	3878.14	16012.17	5514.85	2211.317
Q3 2016	0.28	608.177	2181.74	4132.96	17039.12	5599.8	2183.406
Q4 2016	0.5	582.906	2163.26	4121.03	15102.24	5627.27	2197.235
Q1 2017	0.75	571.375	2307.87	4419.4	16111.38	5749.65	2398.728
Q2 2017	1.01	572.438	2396.92	4611.21	16150.64	5857.17	2161.223
Q3 2017	1.04	584.747	2474.02	4784.94	16722.99	5934.52	2258.003
Q4 2017	1.37	582.88	2584.62	5023.01	17483.36	6079.5	2484.844
Q1 2018	1.7	562.182	2619.55	5116.99	15634.08	6277.5	2474.593
Q2 2018	1.89	556.72	2697.79	5292.9	16590.99	6163.44	2803.959

You are expected to construct a portfolio that contains at least two alternative investment asset classes in the list above while meeting all the investment objectives and constraints. You are required to prepare a report, which should contain the following information 1) Justifiable asset class assumptions. Specifically, you need to estimate expected return (p.a.) and standard deviation (p.a.) for each asset class, i.e. cash, equity, bond, direct property, listed property, hedge fund, and commodity, over short term (1 year) and medium-long term (3-5 years) respectively; estimate the correlation matrix of the seven asset classes, i.e. cash, equity, bond direct property, listed property, hedge funds, and commodity, over short term (1 year) and medium-long term (3-5 years); include all the relevant analysis and/or other supporting evidence to support your assumptions. 2) Justifiable asset class selection. Specifically, you need to propose the asset classes to be included in the fund; e e explain the reasons for proposed asset class selection why these asset classes are selected and why the other asset classes are not selected; include all the relevant analysis and/or other supporting evidence to support your asset class selection; discuss and describe the due diligence required for the selected alternative investment asset classes. 3) Justifiable asset allocation. Specifically, you need to propose an allocation of asset classes for the fund; explain the reasons for such an asset allocation; include all the relevant analysis and/or other supporting evidence to support your asset allocation e e You are expected to construct a portfolio that contains at least two alternative investment asset classes in the list above while meeting all the investment objectives and constraints. You are required to prepare a report, which should contain the following information 1) Justifiable asset class assumptions. Specifically, you need to estimate expected return (p.a.) and standard deviation (p.a.) for each asset class, i.e. cash, equity, bond, direct property, listed property, hedge fund, and commodity, over short term (1 year) and medium-long term (3-5 years) respectively; estimate the correlation matrix of the seven asset classes, i.e. cash, equity, bond direct property, listed property, hedge funds, and commodity, over short term (1 year) and medium-long term (3-5 years); include all the relevant analysis and/or other supporting evidence to support your assumptions. 2) Justifiable asset class selection. Specifically, you need to propose the asset classes to be included in the fund; e e explain the reasons for proposed asset class selection why these asset classes are selected and why the other asset classes are not selected; include all the relevant analysis and/or other supporting evidence to support your asset class selection; discuss and describe the due diligence required for the selected alternative investment asset classes. 3) Justifiable asset allocation. Specifically, you need to propose an allocation of asset classes for the fund; explain the reasons for such an asset allocation; include all the relevant analysis and/or other supporting evidence to support your asset allocation e e