Assets (Valuation/Allocation): Study Session 7
Study Session Materials
Complete List of CFA Program Readings
Topic Overview
Asset Allocation
After developing capital market expectations, the fourth and final task in the planning process is determining the strategic asset allocation. Here the manager combines the investment policy statement and capital market expectations to determine target asset class weights; maximum and minimum permissible asset class weights are often also specified as a risk-control mechanism. The investor may seek both single-period and multi-period perspectives in the return and risk characteristics of asset allocations under consideration. A single-period perspective has the advantage of simplicity. A multi-period perspective can address the liquidity and tax considerations that arise from rebalancing portfolios over time. Such a perspective can also address serial correlation (long- and short-term dependencies) in returns but is more costly to implement.
The first reading is a comprehensive overview of the topic. The second
reading complements the first by delivering in detail a
liabilities-sensitive approach to asset allocation using the example of a
defined benefit pension plan.
View learning outcome statement (LOS) for reading objectives.
Complete List of CFA Program Readings
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Members may download these designated readings. Log in for access. |
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“Asset Allocation” Ch. 5, Managing Investment Portfolios: A Dynamic Process, 3rd edition, William F. Sharpe, Peng Chen, Jerald E. Pinto, and Dennis W. McLeavey (Wiley, 2007) Member download (PDF) |
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View LOS |
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“Linking Pension Liabilities to Assets” Aaron Meder and Renato Staub, (UBS Global Asset Management) Member download (PDF) |
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View LOS |