What Is an Asset Allocation Analysis?
Fund asset allocation is a multi-level system engineering. From the establishment of investment goals and guidelines by the fund's board of directors to the issuing of investment orders by investment managers, it is a complicated process, and each department must conduct research and decision-making.
Fund asset allocation
Right!
- Chinese name
- Fund asset allocation
- Attributes
- Multilevel systems engineering
- Features
- Policy assets allocation from top to bottom
- Features
- Strategic asset allocation
- Fund asset allocation is a multi-level system engineering. From the establishment of investment goals and guidelines by the fund's board of directors to the issuing of investment orders by investment managers, it is a complicated process, and each department must conduct research and decision-making.
- level
- In practice, there are generally three levels of fund asset allocation, from top to bottom: policy asset allocation, strategic asset allocation, and selection of individual assets. [1]
- (1) Policy asset allocation. The core of policy asset allocation is the choice of the investment target market, and the risk return characteristics of this market should be consistent with the investment objectives of the fund. The fund's asset portfolio can include a variety of assets, depending on the goals of the fund. Generally speaking, high-yield and high-risk funds have high-risk assets such as stocks and real estate in their investment portfolios; pension funds that require stable returns can only choose bond assets with low risks and stable income flows as investments Object. In addition to the choice of the target market, policy asset allocation should also determine the degree of fund asset diversification and the degree to which the fund is fully invested. The degree of asset diversification is measured by the number of asset types held by the fund and the distribution ratio of fund assets among different assets. Generally, the lower part requires a greater degree of diversification to reduce the risk of the fund. The degree to which a fund fully invests refers to the proportion of non-cash assets. Generally, open funds require lo% cash assets as a reserve. The more fully the investment, the higher the profit, but in order to maintain a certain degree of flexibility, it is beneficial to hold certain cash assets.
- (2) Strategic asset allocation. Strategic asset allocation refers to the use of mispricing caused by temporary market imbalances within the investment principles and scope established by policy asset allocation to adjust the proportion of various assets to obtain returns. Strategic asset allocation decisions must conform to the general principles of policy allocation. If strategic decision-making exceeds authority, the nature of policy-making decision will be changed, the goal and risk characteristics of the fund will deviate, and the promise to investors will be violated. For example, for a balanced fund, the policy target market and the ratio are 50% each for stocks and bonds. If the stock market averages 40% in a given year and the bond market is only 10%, according to conservative policy ratios, the fund's income is only 25%. If the manager's judgment is correct, if 80% of the funds are invested in the stock market and 20% of the funds are invested in the bond market, the fund income is 34%? Higher than the policy investment income. But if the manager makes a wrong judgment and invests 80% of the funds in the bond market, and only 20% of the funds in the stock market, the fund's return is only 16%. Therefore, strategic decisions have great risks, and the principles and scope of policy decisions can prevent and limit such risks. The key to strategic asset allocation decision is to identify investment opportunities that can yield benefits, that is, to find the wrong pricing of assets in the market. Because the market is not completely efficient, incomplete information, economic cycles, the psychological factors of the investing public, and the non-equivalence in the use of investment opportunities may lead to a certain type of assets being overpriced or underpriced in a certain market. Sexual decision making creates opportunity.
- (3) Individual asset selection. This is the third level of fund asset allocation, and it is also the most specific and operational level. It is within the scope of policy asset allocation, guided by the principles of strategic asset allocation, using various information and models to evaluate assets in the target market, analyzing the risks and returns of specific assets, and finding assets with investment value To achieve the ultimate goal of getting the most revenue.