Analyzing Different Classes of Assets

Analyzing Different Classes of Assets
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Analyzing Different Classes of Assets
Question 1.
A: Ranking by risk level (from Highest to lowest)
Private equities, US large cap equities, 30-year corporate IGs, 30-year-old treasury, and 10-year-old treasury.
B: Ranking by expected return (from highest to lowest)
Private equities, US large cap equities, 30-year corporate IGs, 30-year old treasury, and 10-year old treasury.
Question 2: Allocation for Different Asset Classes
Pension Plan A funded status (%)

Domestic and foreign bond (hedging assets)

Domestic and foreign equities (return seeking assets)

Less than 90%

30-year-old treasury-80%

US large cap equities-85%

90% less than 100%

10-year-old treasury-85%

Private equities-90%

More than 100%

30-year corporate IGs-90%


Question 3: explanation of the thought process in Question 2
The determination of the allocation provided above is based on two distinct decisions that an investor should make to maximize their return while minimizing the risks associated with their investments. First, with hedging, th...