Asset Allocation for Growth in Bull Market

Very Hard Investment Policy And Allocation Asset Allocation

Investors often face the challenge of how to effectively allocate their assets among different classes to optimize their returns while managing risk. Consider the following scenario: A pension fund manager is tasked with revising the asset allocation strategy to achieve a more aggressive growth objective. The fund currently holds a diversified portfolio with allocations of 50% equities, 30% fixed income, and 20% alternative investments. Given recent market trends indicating a strong bull market for equities, the manager is evaluating whether to increase the allocation to equities further, despite the added volatility.

Which of the following asset allocation strategies best aligns with the fund manager's objective to maximize returns in a growth-oriented environment while maintaining an appropriate risk profile?

Increase the allocation to equities to 65%, decrease fixed income to 20%, and keep alternatives at 15%.

Maintain the current allocations but utilize a more aggressive selection within the existing equity exposure.

Reallocate 40% to equities, 30% to fixed income, and 30% to alternatives to hedge against potential volatility.

Hint

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