CFA三級(jí)基礎(chǔ)段培訓(xùn)項(xiàng)目：機(jī)構(gòu)的投資組合管理投資者（標(biāo)準(zhǔn)版）

tfolioManagementforInstitutionalInvestorsIII&(1)&(2)1-234567-89-1011NEW【】】【(1)&(2)EQUITY(1)&(2)【FOR】12-13(1)&(2)NEW【】1516【FOR】【】【】SS14ManagementforInstitutionalInvestors?R33PortfolioManagementforInstitutionalInvestorsCommoncharacteristicsInstitutionalInvestorsPensionplan(DB&DC)SovereignwealthfundsUniversityendowmentsfoundationsBanksInsurersInstitutionalInvestorsinstitutionalinvestorstheLevel3curriculum:plansSovereignWealthFundsUniversityEndowmentsandFoundationsBanksandInsurersNewStakeholdersOldSLLiquidityNeedsLiquidityNeedsTimeUniqueLandInvestmentExternalConstraintsE(R)IRisk(onlyforDB&DC)InvestmentObjectivesRisk(onlyforDB&DC)AAssetAllocationInstitutionalInvestorsPensionPlanPensionPlan,Endowments&FoundationPensionPlan,LifeInsuranceCompanyEndowments&FoundationPensionPlanPensionPlan,Endowments&FoundationPensionPlan,Endowments&FoundationPensionPlan,Endowments&FoundationEndowments&FoundationPensionPlanEndowments&Foundation33InstitutionalInvestors:Characteristics(i.e.,size):Theissuescaleforinstitutionalinvestorsbecausemayimpactinvestmentcapabilities,accessstrategies,tradingcosts,andotheraspectstheinvestmentprocess.Institutionalinvestors’assetsundermanagementcanrangesmall(e.g.,lessthanmillion)(e.g.,morethanSmallerinstitutionsmayfacechallengesthatunableaccesscertaininvestmentsthathaveahighminimuminvestmentsize.Smallinstitutionalinvestorsmayalsofacechallengeshiringskilledinvestmentprofessionals.Theymoreoutsourceinvestmentsexternalassetmanagersandoninvestmentconsultants.Largerinstitutionalinvestorsexperiencebenefitsthatallowthemaccessawiderinvestmentuniverse,andtheycaninvestmentprofessionals.InstitutionalInvestors:CharacteristicsLong-terminvestmenthorizon:Institutionalinvestorsgenerallyhavealong-terminvestmenthorizonthatoftendeterminedbyaspecificstream,suchasthebenefitobligationapensionplan,thespendingpolicyanendowment,orotherobligations.Pensionfunds,sovereignwealthfunds,endowments,andfoundationsalltypicallyhaveinvestmenthorizonsandliquidityneeds.Lowneedsallowtheseinstitutionsinvestarangealternativeassetclasses,includingrealestate,naturalresources,infrastructure,andhedgefunds.Banksandinsurancecompanies,tendbemuchmorefocusedwhileoperatingwithintightregulationsdesignedensureadequacycapital.InstitutionalInvestors:CharacteristicsGovernanceframework:Institutionalinvestorstypicallyimplementtheirinvestmentprogramsthroughaninvestmentofficethatoftenhasaclearlydefinedgovernancemodel.Thegovernancestructuregenerallyincludesaboarddirectorsandaninvestmentcommittee.Theand/orinvestmentcommitteeaestablishingtheinvestment,definingtheappetite,settingtheinvestmentstrategy,andmonitoringtheinvestmentperformance.Themaycomprisecompanyrepresentativedirectors,employeerepresentativedirectors,andindependentdirectors.Independentdirectorsusuallyselectedincreasetheoverallinvestmentexpertise.Investmentcommitteescanbesub-committeesthewithdelegatedauthorityoverseeinvestmentInstitutionalInvestors:CharacteristicsRegulatoryframeworks:Institutionalinvestorsmustcontendwithmultipleregulatoryframeworksthatfrequentlyybyjurisdictionandcomplexityandoftenevolving.Regulationshavebeentightenedsincethefinancialcrisisanattemptlowerleverage,increasecentralizedclearing,andreporting–AgentAsinstitutionalinvestorsmanageassetsonbehalfothers,principal–agentissuesmustberecognizedandmanagedForinstitutions,conflictoccursinternallythroughtheappointmenttheinvestmentcommitteeandinvestmentstaffandoccursexternallythroughtheuseoutsourcedinvestmentmanagers.OverviewIPSTheIPSestablishespoliciesandproceduresfortheeffectiveadministrationandmanagementtheinstitutionalassets.Awell-craftedIPScanhelpminimizeprincipal–agentchallengesbyclearguidanceonday-to-daymanagementtheassets.TheIPSshouldinclude:Theandinvestmentobjectives(i.e.,returnandrisktolerance).DiscussiontheinvestmentandAnyconstraintsaffectingtheassetallocation(legal,regulatory,andaccounting).Assetwithrangesandassetclassbenchmarks.Reportingrequirements.TheIPSshouldbereviewedorwhenmaterialchangesinvestorcircumstancesand/orthemarketenvironment,astheIPSservesasthefoundationfortheinvestmentprogram.InvestmentApproachesTheinvestmentportfolioaninstitutionalinvestordesignedmeetobjectivesandshouldreflecttheappropriateriskandconsiderationsaddressedtheIPS.Whileinstitutionalinvestorseachhaveuniquecharacteristics,fourdifferentapproachesevolved,including:NorwayModel;EndowmentModel;CanadaModel;DrivenInvesting(LDI)Model.InvestmentNorwayModel(sovereignwealthfund)stylecharacterizedby60%/40%equity/fixed-incomeallocation,fewalternatives,largelypassiveinvestments,tighttrackingerrorlimits,andbenchmarkasastartingposition.Pros:Lowcost,transparent,suitableforlargescale,easyforboardtounderstand.領(lǐng)取最新資料微：xuebajun888sCons:Limitedvalue-addedpotential.EndowmentModel(universityendowment，也有DB)Characterizedbyhighalternativesexposure,activemanagementandoutsourcing.Pros:Highvalue-addedpotential.Cons:Expensiveanddifficulttoimplementformostsovereignwealthfundsbecauseoftheirlargeassetsizes.Highfees/costsInvestmentCanadaModel(pensionplan，也有SWF)Characterizedbyhighalternativesexposure,activemanagement,andinternallymanagedassets.:Highvalue-addedpotentialanddevelopmentinternalcapabilities.Cons:expensiveanddifficultmanage.LDIModel(banks&insurers，也包括美國(guó)的DB和部分歐洲養(yǎng)老金)Characterizedbyfocusonhedgingandinterestrateriskincludingduration-matched,fixed-incomeexposure.Agrowthcomponentthereturn-generatingportfolioalsotypical(exceptionsbeingandinsurancecompanyportfolios).:Explicitrecognitionasparttheinvestmentprocess.Cons:Certainrisks(e.g.,longevityrisk,inflationrisk)maynotbehedged.Fundsfundslong-termsavingandinvestmentplansdesignedaccumulatesufficientassetsforthefinancialneedsretirees.Theretwomaintypespensionplans:Definedbenefit,whichaplansponsorcommitsaspecifiedretirementbenefit.Definedcontribution,whichcontributionsdefinedbutultimateretirementbenefitnotspecifiedorguaranteedbytheplantheremanyandnuancesthesetwocategoriespensionplans.PlansComparisonDB&DCPlanCharacteristicsDefinedBenefitPlanDefinedContributionPlanBenefitdefinedBenefitdeterminedBenefitpaymentsabetweenemployeepensionperformanceinvestmentsselectedTheemployeeistypicallyprimarycontributor—employercontributewelloralegalobligationcontributeaemployerisprimaryemployeecontributewell.ContributionsTheemployeedetermineshowwhatinvestinhis/herobjectivesinvestmentvehiclesselectedplanpensiondetermineshowwhatinvestinplanobjectives.InvestmentdecisionmakingPlansCharacteristicsDefinedBenefitPlanDefinedContributionPlanemployerriskemployeeriskliabilitiescontributionsshortfall.Investmentriskmeetinghis/herobjectivesforthisinfundingMortalityriskispooled.Ifabeneficiaryhe/shetypicallyleavesaemployeerisknotmeetinghis/herobjectivesforthisintermsfundingemployeelongevityrisk.Mortality/portionbenefitsinLongevityriskbenefitbeneficiarieslivelongerDB:sponsors(employers)mustcontributionsplanassets.investmentperformanceresultsponsorshavingextracontributionsanunderfundedplan(i.e.,whenassetslowerthanbeneficiaries(employeesretirees)facetheultimateriskthatanemployerdefaultsoncontributionsplanassets.Theinvestmenttheinvestmentcommittee,and/orthedirectlyimpactedbythesuccessortheplan.Governmentsstakeholdersthattheytaxincentivesforemployeessaveforretirement,andtaxpayersultimatelyfacethecostswelfareforthosethathavefailedadequatelysaveforretirement.ShareholdersthecorporateemployerstakeholderssinceanunderfundedplancauseabalancesheetandlowerincomeforthecompanItalsoleadhigherfinancialrisk,whichincreaseshareprice.DB:andInvestmentTheaDBpensionplanthepresentthefuturepaymentswillbeneficiariesuponretirementordeath.Inestimatingfuturebenefits,theplansponsormustseveralkeyassumptions,suchasthegrowthratesalaries,expectedvesting,andmortalityanddisabilityassumptions.meansthatemployeesonlybecomeeligiblereceiveapensionaftermeetingcertaincriteria,typicallyaminimumnumberyearsservice.Acommonpensionindustrymetricusedgaugeassetsufficiencythefundedratio,alsoknownasthevestedbenefitindexVBI)somecountries.Thefundeddefinedas:??????=?????????????????/???????????????????????????????DB:ImpactIncreaseinRationaleService/tenure(yearsBenefitsusuallylinkedserviceliabilitySalaryliabilityBenefitsusuallylinkedfinalPlanbenefitsforeveryliabilityliveinIflivelongerinwillbenefits.LongevityAdditionalcontributionscontributionsusuallybenefitsliabilityHigheremployeeturnoverfewerEmployeeturnoverLowerliabilityemployeeslikelyworkserviceforvestingIninforliabilities,loweringliabilities.ExpectedinvestmentreturnLowerliabilityAhigherwillgivealoweralowerDiscountrateLowerliabilityDB:InvestmentTheplanssponsortotoleratecontributionratesmayimpacttheinvestmenthorizon,andhencethepensionappetiteforsuchinvestmentsasequityandventurecapital.Anotherimportantfactordeterminingtheinvestmenthorizonthemixparticipants(i.e.,currentemployees)versusretirees.Thehighertheproportiontheproportionactiveparticipants,themorematuretheplan—hence,thelowertolerance.SomematureDBpensionplanshavebeenfrozenastheytypicallyexperiencenegativecashflowwherebenefitpaymentsexceedcontributions.themorematureapensionfund,theshorterinvestmenthorizon,whichdirectlyaffectsrisktoleranceandtheallocationbetweenfixed-incomeassetsandriskierassets.DB:RiskConsiderations風(fēng)險(xiǎn)目標(biāo):DBplan的風(fēng)險(xiǎn)容忍度主要取決于計(jì)劃的盈虧狀態(tài)，發(fā)起人的財(cái)務(wù)狀況和盈利能力，發(fā)起人和退休金計(jì)劃基金的風(fēng)險(xiǎn)暴露共性，計(jì)劃本身特征和勞動(dòng)力特征等，詳見下表：CategoryExplanationHigherpensionsurplusorhigherfundedstatusimpliesgreaterrisktolerancePlanfundedstatus(surplusordeficit).statusLowdebtandhighercurrentexpectedimplygreaterrisktolerance.Largesponsorcompanysizepensionplansizeimpliesgreaterrisktolerance.Debttotalassets;CurrentandexpectedSizeplancomparedmarketcapitalizationsponsorSponsorfinancialstatusandDB:RiskConsiderationsCategoryExplanationCorrelationsponsorSponsorandpensionThelowerthe,thegreaterrisktolerance,allelseequal.fundcommonoperatingresultswithexposurespensionassetreturns.ProvisionforSuchoptionstendreducethedurationplanliabilities,implyinglowertolerance,allelseequalretirement;featuresProvisionforlumpsumdistribution.Theyoungertheworkforce,thegreatertheproportionlives,thegreaterthedurationplanandthegreatertherisktolerance.Ageworkforce;Activelives.DB:InvestmentObjectiveTheprimaryobjectiveforDBpensionplansmeetpensionthroughacombinationinvestmentreturnsandcontributions.Thesecondaryobjectivecouldbeminimizethepresentexpectedcashcontributions.Computationg=g.ALWhereg=Long-termratereturnonplanassetsAg=actuarialdiscountrateLUnderfunded,g>g;ALWhenconsidertherisktheplansponsorwillingnessandraisecontributionrates,g=g+riskpremiumALDB:Needsplansmustmaintainenoughtheirastheycomedue.Liquidityneedsgenerallyhigherwhen:Theproportionretiredlivesthesincereceivingbenefitpayments.Frozenplanshavehigherliquidityneedsthannonfrozenplansduebenefitsexceedingcontributions.TheworkforcetheemployersincethebenefitsbeTheplanhashigherfundedstatus,sincethisleadlowersponsorcontributionsandmorebenefitpaymentsneedbemetexistingplanassets.Theplanparticipantshavethetowithdrawtheplan,aneventthatusuallytriggerspaymentsparticipants.sponsors(employers):notfacingtheinvestmentriskorlongevityrisktheassets,importantfiduciaryresponsibilities.Theseincludecontributingtheplan,overseeingtheinvestmentplanassets,andofferingsuitableinvestmentoptionsplanparticipants.beneficiaries(employeesretirees)facetheinvestmentriskcontributionsandinvestmentreturnsnotmeetingretirementneeds.Theyalsofacethelongevityrisklongerthanexpectedandtheirsavings.Theboardmustcommunicatewithparticipantsthemwellinformed,andthesecommunicationsmustconsidertheparticipants’levelsophistication.Themayberequiredselectadefaultinvestmentoptionwhenparticipantsdisengaged.Governmentsstakeholdersthattheytaxincentivesforemployeessaveforretirement,andtaxpayersultimatelyfacethecostswelfareforthosethathavefailedadequatelysaveforretirement.andInvestmentInaDCplan,participants’pensionbenefitsbasedonamountscreditedtheirindividualaccountstheformcontributionstheemployeeandpossiblytheemployer)andinvestmentreturns.theaDCpensionplansponsorequalonlyrequiredcontributions.TheDCplanmayinvestadiversifiedportfoliothatmayincludeinvestmentsnotgenerallyofferedinvestors,suchasequityandhedgefunds.Thispossiblesincepoolinggivestoandthelong-termtheaggregatebeneficiaries.andInvestmentManyDCplansofferinvestmentoptionsthatallowparticipantsselecttheinvestmenthorizonthatbestalignswiththeirowninvestmenthorizon.Exampleslife-cycleoptionsortargetdateoptions,whichfeatureathatmanagestheassetmixbasedonadesiredretirementdate.Theretwotypeslife-cycleoptions:Participant-switchingoptionsautomaticallyswitchmembersamoreconservativeassetallocationastheyage.Participant/cohortoptionpoolstheparticipantwithotherinvestorswithasimilarretirementdateandthefundbeingmanagedmoreconservativelyastheretirementdateapproached.InvestmentObjectivesTheobjectivedefinedcontributionpensionplansprudentlyassetsthatsupportspendingneedsretirement.TheinvestmentoptionsofferedbytheDCplansponsorcanbemanagedeitherin-houseorexternallyaswellaspassivelyoractivelIftheplanoffersfundswithmanagement,asecondaryobjectivemaybeoutperformthelong-termbenchmarkconsistingtheweightedaverageindividualassetclassbenchmarksandthepolicyweightsdefinedbythestrategicassetallocation.ForsomeDCplansimportanttheirinvestmentoptionsoutperformthoseotherDCpensionplans,whichparticularlycountrieswhereparticipantscanvoluntarilyswitchbetweenDCplanproviders.NeedsTheprimarydriversneedstheagetheworkforceandparticipantstowithdrawfromtheplan.AsthecaseforDBschemes,thesefactorshigh,thenneedsthefundbehigh.Itimportantforpensionplansregularlyperformstresstests,whichmayincludestressingthetheirassetsandmodellingreducedcertainassetclassesamarketdownturn.Suchstress-testingmayalsohelpDCplanswhetherparticipantsmightswitchoutmoreinvestmentoptionsduringmarketdownturns.DB&ExternalConstraintsRegulationsybycountry;theresimilarthemesregulation.ManyregulatorsnowextensivereportingonfeesandcostsincurredbyplansbothinternallyandInAustraliaandtheUnitedtherearequirementfortheplanofferadiversifieddefaultoptionforparticipants.ataxperspective,rulesonceagainybycountry;pensionfundsoftentreatedfavorablybygovernmentsorderencourageindividualssaveforretirement.DCplanstheUnited(referredasplans)taxdeferred.Thismeansparticipantspretaxcontributionsandinvestmentearningsnottaxable;benefitstaxedasordinaryincome.Accountingrules,differbycountry.IntheUnitedcorporateDBpensionplansmustfollowparticularlyAccountingCodification(ASC)Compensation—Benefits,whichrequiresthatfundedstatusbeshownasanassetoronthebalancesheet.DB&AssetAllocationAnexaminationpensionfundassetallocationsshowsverydifferencesaverageassetallocationsbycountry.Suchinter-andintra-nationaldifferencesdrivenbymanyfactorsdiscussedearlierthisreading,includingthedifferenceslegal,regulatory,accounting,andtaxconstraints;theinvestmentobjectives,riskappetites,andinvestmentbeliefsthestakeholders.DB&AssetAllocationItapparentthattheallocationequitieshasdecreasedaboutaboutwhileallocationsthe‘Other’categoryalternativeshasincreasedaboutoverthesameperiod.Notethecategory‘Other’includeshedgefunds,equityfunds,loans,structuredproducts,othermutualfunds(i.e.,notinvestedequities,bonds,orcash),land,buildings,andothermiscellaneousinvestments.Withinequities,theresomeevidencehomedomesticequitymarkets.ExampleFrankSmit,,CFOcompanyA.CompanyAasmallcompanybasedAmsterdam,andallrevenuescomeEurope.Productdemandhasbeenstrongthefewyears,althoughhighlycyclical.Thecompanyhasrisingearningsandastrongdebt)balancesheet.CompanyAayoungandassuch,definedbenefitpensionplanhasnoemployees.Thisessentiallyactive-livesplanhasassetsandan8surplustheprojectedbenefitobligationSeveralfactsconcerningtheplanfollow:Thedurationthe(whichallEurope-based)years.Thediscountrateappliedthese6percent.Theaverageageworkforceyears.Basedontheinformationprovided,discussrisktolerance.ExampleSolution:ADSEappearshaveaboveaveragerisktoleranceforthefollowingreasons:Theplanhasasmallsurpluspercentplanassets);thatis,theplanoverfundedby8million.Thebalancesheetstrongusedebt).Thecompanydespiteoperatingacyclicalindustry.TheaverageageworkforceFunds(SWFs)Sovereignwealthfunds(SWFs)state-ownedinvestmentfundsorentitiesthatinvestfinancialorrealassets.GovernmentshaveestablishedSWFsbudgetsurplusesmeetdifferentobjectives.TheInternationalMonetaryFund(IMF)hasdefinedtypessovereignwealthfundsObjectiveExamplesSetupinsulatethebudgetandeconomyFundChile;commoditypriceTimor-LesteFund;EconomicandSocialBudgetfundsandexternalshocks.FundEstablishedallocateDevelopmentresourcesprioritysocio-MubadalaNationalDevelopmentFund;IrelandInvestmentFundfundseconomicprojects,usuallyinfrastructure.Funds(SWFs)ObjectiveExamplesIntendedsharewealthacrossgenerationsbyAbuDhabiInvestmentAuthority;KuwaitInvestmentSavingsfundstransformingnon-renewableAuthority;QatarInvestmentassetsdiversifiedfinancialassets.Authority;NationalWealthFundIntendedreducethenegativecarrycostsChinaInvestmentCorporation;ReservefundsholdingreservesorearnInvestmentCorporation;higherreturnonamplereserves.GIC(Singapore)SetupmeetidentifiedfutureoutflowswithrespectNationalSocialSecurityFundreservefundspension-related(China);NewZealandcontingent-typeonSuperannuationFund;Futuregovernments’balancesheets.FundAustraliaThestakeholdersSWFfollows:CurrentfuturebenefitthesuccesseitherdirectlythroughreceivingpaymentsorindirectlythroughlowerorincreasedinvestmentthedomesticInvestmentofficesinvestSWFassetseitherdirectlyin-houseorappointexternalmanagers.Theboardhasafiduciarydutytheultimatebeneficiariesthefund.GovernmentsstakeholdersthattheymayonSWFreturnsbalancebudgetdeficits.andInvestmentHorizonsThereawideinvestmentobjectives,investmenthorizons,andneedsamongthetypesSWFs,sowediscusseachtypeBudgetfundsestablishedinsulatethefiscalbudgetcommoditypriceandotherexternalshocks,particularlyarevenuetiednaturalresourceproductionorothercyclicalindustries.Thesefundshaveuncertainandshortinvestmenthorizons.Theirmainpurposeriskmanagementbecausesuchfundsmaybeneededonashort-termhelpsupportthegovernmentbudget.TheinvestmentobjectiveusuallydeliverreturnsinflationwithalowanegativereturnanyandInvestmentHorizonsDevelopmentfundsestablishedsupportaeconomicdevelopmentthroughinvestingessentialinfrastructure,innovation,orbysupportingindustries.notclearlydefinedandtypicallyuncertainfordevelopmentfunds,buttheiroverallobjectiveacountreconomicgrowthordiversifytheeconomy.andInvestmentHorizonsSavingsfundsaretypicallyestablishedtotransformproceedsfromthesaleofnon-renewablenaturalresourcesintolong-termwealthandadiversifiedportfoliooffinancialassets.Themissionofasavingsfundiswealthtransfertofuturegenerationsafterthesourcesofnaturalwealthhavebeendepleted.Assuch,theirliabilitiesarelong-term.Somesavingsfundshavearealreturnobjectiveoranexplicitspendingpolicy(likeendowments).Aspecialcaseofsavingsfundsinvolvesgovernmentinvestmentholdingcompanies,whicharefundedfromtheprivatizationproceedsofnationalcompanies(e.g.,Holdings).Savingsfundsshouldavoidinvestinginassetshighlycorrelatedwiththenon-renewableresourcesfromwhichthegovernmentistryingto領(lǐng)取最新資料微：xuebajun888sandInvestmentHorizonsReservefundsestablishedcentralexcessforeigncurrencyreserves.TheobjectiveachieveareturnhigherthanthatFXreserves(usuallyinvestedlow-duration,high-gradedebtinstruments)andreducethenegativecost-of-carryholdingFXreserves.CentralaccumulatesuchreservesastheyprintlocalcurrencybuyFXUSdollarsoreuros)localfirmssellingexportgoods.ThecentralthenissuemonetarybondsabsorbtheexcesslocalTheirinvestmenthorizonsverylong,withtypicallynoimmediateorinterimpayoutexpectation.andInvestmentHorizonsreservefundsestablishedhelpprefundcontingentpension-relatedonthebalancesheet.reservefundsusuallyfundedfiscalsurplusesduringeconomicbooms.Thehelpreducetheburdenonfuturetaxpayersbyprefundingsocialsecurityandhealthcarecostsarisingagingpopulations,sothesefundsgenerallyhavelong-terminvestmenthorizons.Thereusuallyanphase(decumulationphase)wherethegovernmentpredominantlycontributes(withdrawsfrom)thefund.Theinvestmentobjectivepensionreservefundsearnreturnssufficientmaximizethemeetingfuturepension,socialand/orhealthcarecostsastheyarise.NeedsBudgetfunds.Thesemustmaintainthehighestlevelandinvestassetswithrisksignificantlosstheshortterm,ordermeetshort-termdeficitscausedbynegativeeconomic-orcommodity-relatedevents.Developmentfunds.Becauseinfrastructureandresearchandinvestmentslongterm,fundsestablisheddevelopsuchprojectsgenerallyhavelowneeds.Savingsfunds.Themainobjectiveaccumulatewealthforfuturegenerations;hence,needslowest.Liquidityneedsincreaseasthenaturalresourcesbecomedepletedandthegovernmentwithdrawsthefundmeetbudgetaryneeds.Reservefunds.Liquidityneedslowercomparedstabilizationfundsbuthighercomparedsavingsfunds.Liquidfixed-incomesecuritiesusuallyheldthatcanbesoldthereadramaticchangethereservesthecentralbank.reservefunds.Liquidityneedsbeinglowerduringtheaccumulationstageandhigherduringthedecumulationstage.ExternalConstraintsalegalregulatoryperspective,SWFstypicallyestablishedbylawsthattheSWFmissionandstructure.Thismayclearrulesassetallocation,particularlythecaseadevelopmentfundwithaspecificsocioeconomicmission.TheSantiagoPrinciples,abest-practicesframeworkestablishedbytheInternationalForumSWFs(IFSWF),addressessuchconcernsalongsideotherelementsexpectedahigh-qualitysuchasethics,riskmanagement,andregularmonitoringforcompliancewiththeprinciples.SWFsgenerallytaxexempt.Thismaytheclaimwithholdingtaxesortaxcreditsthatnormallytaxableinvestors.InvestmentObjectivesSWFInvestmentObjectivesCapitalpreservationAimsearnreturnsaboveinflationwithalowlossesShouldavoidassetscorrelatedwiththesourcegovernmentrevenuesBudgetstabilizationSupportaeconomicdevelopmentandincreaselong-runeconomicgrowthImplicitobjectiveearnarealratereturngreaterthanrealdomesticGDPgrowthorproductivitygrowthDevelopmentMaintainpurchasingpowertheassetsoverwhilemakingongoingspendingongovernmentbudgetaryneedsSavingsReserveEarnaratereturnexcesstheyieldthegovernment/centralonbondshasissuedreserveEarnreturnsmeetfutureunfundedpensionandsocialcarepaymentspromisedbythegovernmentAssetAllocationBudgetfunds.Themajorityfixedincomeandcashduethedefensivenaturethefund.Developmentfunds.Thesedrivenbythesocioeconomicmissionthefund(e.g.,investmentlocalinfrastructureprojectsSavingsfunds.Alonginvestmenthorizonmeanshighallocationstowardequitiesandalternativeinvestments,suchasequityandrealassets.Reservefunds.Allocationssimilarthosesavingsfunds,butwithlowerallocationalternativesduethepotentiallyhigherneeds.reservefunds.Thesehavehighallocationsequitiesandalternativesduealonginvestmenthorizonandlowneedstheaccumulationphase.ExampleTheFundapensionreservefundestablishedbythegovernmentWigitaniabysettingasidecurrentgovernmentsurpluses.Itsobjectivemeetfutureunfundedsocialsecuritypaymentscausedbyanagingpopulation.ThefollowinganextracttheFundIPS.EffectivethegovernmenthavethewithdrawassetsmeetpensionandsocialsecuritydueeachActuarialprojectionsestimateannualpayoutsbeaboutthetotalfundatthattime.GiventhislevelcashtheFundexpectedmaintainmostassetfortheforeseeablefuture.Assuch,doesnotrepresentandate’formeasurementpurposes.Along-terminvestmenthorizonremainsappropriateatpresent.theappropriatetimeframe,risktolerance,portfolioconstructionandmaychange.ExampleWhattheneedstheFund?Solution:theextract,weseethattheunfundedpensionandsocialsecuritythattheFundmeantcoverexpectedbeabouttotalfundperstartingManagementthefundneedensurethattheyhavesufficientatthatmeetthoseongoingliabilities.Untilthattime,needsverywhichshouldallowtheFundinvestasignificantpartportfolioless-alternativeassetclasses.ExampleWhatfactorsdoestheneedconsiderwhenreviewingtheinvestmenthorizon?Solution:Theshouldconsidertwoseparatephaseswhenreviewingtheinvestmenthorizonandinvestmentpolicy:anaccumulationphaseandadecumulationphase.ThephaselastsuntilandallowstheFundinvestwithnoneedsandconcernforinterimThedecumulationphasestartsafterwhenthegovernmentexpectswithdrawabouttheassetsonanannualbasis.Theinvestmenthorizon,needs,andrisktoleranceneedbemodifiedduringthedecumulationphase,whichaffecttheinvestmentEndowments:Theseendowmentstypicallyfundedthroughgiftsanddonationsandintendedhelptheinstitutionsprovideforsometheirmainservices.EndowmentfundsinvestcapitalmarketsprovideasavingsandgrowthmechanismthatallowstheinstitutionmeetmissionStakeholdersThestakeholdersauniversityendowmentcurrentandfuturestudents,alumniwhocontributegiftsanddonations,anduniversityemployeeswhoselivelihoodsdependontheoftenhaverepresentationontheorinvestmentcommittee,suchasalumniwhomaybeinvestmentprofessionalsEndowments:&InvestmentTheneedmaintainintergenerationalequityandtheunlimitedtheuniversitymeanendowmentshaveaperpetualinvestmenthorizon.Theendowment’sthefuturepayoutspromisedtotheuniversity,presentedanofficialspendingTheendowment’sspendingpolicyshouldensureintergenerationalequitywhilesmoothingpayoutsinsulatetheuniversitymarketThedollaramountspendingeachyearcanbestatedasaweightedaveragethepreviousyearspending(adjustedforinflation)andaspendingrate(usuallybetweenand6%)appliedamovingaverageassetsundermanagementEndowments:&InvestmentSpendingrulescanbesummarizedbythefollowingformula:?+1=?×????????×1++??)×(?????????×?verage???)w=weighttheprioryearspendingamountConstantgrowth(w=1)TheendowmentprovidesafixedannualpayouttheuniversityonceadjustedforinflationbytheHigherEducationPriceIndex(HEPI).Whilemethodgivesmorecertaintytheuniversitythepayoutsthatbereceived,meansthepercentageendowmentoutperiodicallyfluctuatewiththeendowmentEndowments:&InvestmentMarket(w=Annualpayoutsaprespecifiedpercentage(thespendingrate,usuallybetweenand6%)thethree-five-yearmovingaverageassetvalues.Payoutsunderthismethodprocyclicalthatspendingwillfluctuatewiththemovingaverageassetvalues.Hybrid(0<w<1)Spendingaweightedaveragetheprevioustworules.Endowments:&InvestmentOtherliability-relatedfactorsthatneedbeconsideredasfollows:Fundraisingfromdonors.Giftsanddonationscomingintotheendowmentmeanthatthenetspendingratecloserassetsratherthanthespendingrateapplied.theuniversityonthespendingfromtheendowment.Allelseequal,theendowmentspendingcomprisesalargerproportiontheoperatingbudget,thentherisktolerancetheendowmentCapabilitytheendowmentoruniversitytodebt.A