Five AIM students (Ted Linn, Rupali Varma, Tom Kelly, Harrison Davis, and Vincent Ong), along with Brady Endl (Dr. Krause’s graduate assistant), have completed the first phase of the review and will be presenting their findings to the Rep’s Investment Committee on Monday, November 14th. The investment review process includes the following steps:
· Review the Investment Policy Statement (including a survey of the committee members)
· Conduct an Asset Allocation Review
· Perform a Portfolio Performance Review
· Evaluate Individual Managers
· Produce a Summary Report
The students have completed surveying the investment committee members regarding their risk tolerance and preferences for asset mix rebalancing and disbursement – as well as asset classes they wish to consider or avoid. The results, which were compiled and analyzed by Harrison Davis, will be presented to the committee this evening. Additionally, Ted Linn and Rupali Varma will review the existing investment policy statement and will be presenting their observations and recommendations at the meeting.
The asset allocation review was conducted using historical asset returns, volatility, and other risk measures for the major asset classes from 1991-September 2011 (utilizing Morningstar Direct). An efficient frontier analysis indicated that the current MRT portfolio was close to an optimal asset mix for the underlying risk tolerance of the committee. Two ‘efficient’ portfolios with the same and less risk were evaluated and a recommended asset allocation (with proxy indexes, target %, and ranges) will be presented.
The next steps following today’s meeting will include specific recommended changes to the investment policy statement, a thorough portfolio review of the individual managers, and suggestions for the frequency of portfolio rebalancing.
“This project has been highly rewarding for the students involved – and is another example of the ‘applied’ learning experiences that students receive in the AIM program,” Dr. Krause stated. “While the Rep project is not yet compete, other students in the AIM program are interested in similar opportunities to engage in exercises like this next semester with other local foundations.”
Dr. Krause added, “This has been an excellent learning experience. The students have had an opportunity to put the concepts they have been studying in the classroom into practice. The ability to work with current data, high powered models, and investment committee members has been valuable. I know the students appreciate this opportunity and I hope we have a chance to do similar work for other organizations.”