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Unit03 Asset Allocation - Learning Outcomes Describe the...

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12/14/2011 1 Unit 3 Asset Classes and Asset Allocation 1 Learning Outcomes Describe the key asset classes and their investment characteristics Explain the role of managed funds and derivatives for asset allocation Explain the concept and purpose of investment policy statement Suggest and justify asset allocation for a given set of investment objectives and constraints. Discuss the theory, evidence and implication of time horizon and equity investment risk Explain different types of asset allocation strategies Discuss the implication of market efficiencies for market timing and asset allocation 3 Unit 3-1 Asset Classes • Shares Fixed income securities Real estate • Commodities Managed funds • Derivatives 4 Shares (Listed) Shares are equity investments that represent ownership in a corporation Each share represents a fractional ownership in the firm Listed shares offers growth and liquidity Shares, short term debt, and family home are the most popular investments among individual investors 5 Shares Unlisted (Private Equity) Private equity is shares in unlisted companies. The private equity market is relatively • Informationally inefficient Illiquid and chunky Private equity is appropriate for high net worth investors or indirectly invested via private equity funds. Main purpose of this asset class is growth and diversification. 6
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