Reading 3.1 and Reading 3.2 and Reading 3.3

Core of investment objective statement

Return Requirements

what is the highest level of the governance strucutre

investment comittee and they will approve the stategic asset allocation

what does effective investment governance aim to minimize

decision risk reversal

Risk of reversing investment decisions at the worst possible time

what are nonfinancial a/l referred to as and are a part of what

the extended portfolio a/l

part of the economic b/s

what are some examples of the economic B/s

PV of expected earnings (human capital)

pv of pension income

pv of expected intellecual property royalties

explain human capital as a life cycle balanced fund (ie target retirement fund)

when person enters the workforce- human capital greater than financial capital

slowly financial capital outweigh human capital

3 types of asset allocation approaches

1. asset only

2. liability relative

3. goals based

Mean variance optimization

Asset only approach- incorporates expected returns, volatility, and correlations of asset classes

Goal: maximize expected return per unit of risk

Surplus Optimazation

libability approach:

focused on the surplus rather than returns