Asset Allocation Adjustment in Response to Interest Rates

Thomas is a portfolio manager responsible for managing a well-diversified fund that includes equities, bonds, and alternative investments. As part of his asset allocation strategy, he aims to adjust his portfolio based on the changing market conditions while also considering the risk tolerance and investment objectives of his clients.

With the recent increase in interest rates, Thomas is contemplating how to effectively implement these changes in asset allocation for his fund. He needs to decide how to adjust the portfolio's exposure to various asset classes to optimize returns while maintaining an acceptable level of risk.