Strategic Asset Allocation and Market Forecast Adjustments

Very Hard Asset Allocation Strategic Asset Allocation

Consider a pension fund that has $1 billion in assets and aims to maintain a strategic asset allocation (SAA) in order to achieve a long-term return target while managing risk. The fund's investment committee reviews its current asset allocation and is considering adjustments due to recent market volatility and changes in risk tolerance among beneficiaries. The current strategic allocation is 60% equities, 30% bonds, and 10% alternative investments.

In this context, which of the following actions is NOT typically aligned with the principles of Strategic Asset Allocation?

Rebalancing the portfolio to restore the targeted asset allocation after significant market movements.

Adjusting the equity allocation to 70% in response to a market forecast indicating strong future returns.

Periodically reviewing the strategic asset allocation based on changes in long-term financial goals.

Hint

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