Asset Allocation Strategy for Foundations and Endowments

Very Hard Institutional Portfolio Mgmt Foundations And Endowments

The Global Cultural Foundation (GCF) is a significant non-profit organization allocated with an endowment of $500 million primarily intended to support global cultural heritage projects. Recently, the board of trustees at GCF debated altering the traditional approach to their asset allocation strategy, primarily focusing on the long-term sustainability of the endowment while also addressing current inflation concerns.

GCF's long-term objective is to achieve an average annual nominal return of 6%. With rising inflation rates, the investment committee is considering a more aggressive stance on equities and alternatives in order to protect and potentially enhance real returns. The board is also keen on maintaining liquidity for their short-term project funding needs.

After evaluating these factors, the investment committee is weighing three potential asset allocation strategies:

Lower equity exposure to 20% and increase fixed income to 70%, with 10% in alternatives.

Maintain a 60% equity, 30% fixed income, and 10% alternatives allocation.

Increase equity exposure to 75% and reduce fixed income to 15%, with 10% in alternatives.

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