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

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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

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.

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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