Optimal Investment Strategy for Endowment Fund

Easy Institutional Portfolio Mgmt Foundations And Endowments

ABC Foundation is a non-profit organization that has a perpetual endowment fund with a target return of 5.5% annually. The investment committee is currently reviewing its investment strategy and is considering an allocation shift in its portfolio. The Foundation has two main objectives: to ensure long-term capital preservation and to provide a consistent stream of income for its operations without significantly drawing down the principal.

Given this context, what would be the most appropriate investment allocation strategy for the ABC Foundation to achieve its objectives?

Increase allocation to high-yield corporate bonds to maximize income.

Allocate a higher percentage to equities for growth potential.

Maintain a balanced allocation between fixed income and equities to ensure stability and income.

Hint

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