Portfolio Diversification Strategy for a Foundation

Easy Institutional Portfolio Mgmt Foundations And Endowments

As an investment manager for a foundation, you are tasked with developing an investment policy that aligns with the foundation's long-term objectives. The foundation has a spending policy whereby it distributes 5% of its average market value over the past three years to support its mission.

Given this context, which of the following approaches would be most appropriate for the foundation's portfolio diversification strategy?

Invest 60% in equities and 40% in bonds, focusing on capital appreciation.

Invest 40% in equities, 40% in bonds, and 20% in alternative investments to minimize volatility.

Invest 100% in short-term fixed income to ensure liquidity for spending.

Hint

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