Post on 14-Apr-2015
_____________________________________________
CODE: BBA 2009
PORTFOLIO MANAGEMENT
______________________________________________
ASSIGNMENT
Name : TAN TZE JUIN
IC : 900202-01-5416
H/P : 016-7769571
Name of Lecturer : Dr. SEAN KOH
APRIL SEMESTER 2012
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CONTENT
Guidelines/Marking Criteria PAGES
1.0 Introduction
1.1 Overview of Company
1.2 Problem Statement
1.3 Research Scope
1.4 Research Objective
1.5 Significant of the Study
1.6 Limitation of Study
03-11
2.0 Background of Study
2.1 Competitive advantage
12-13
3.0 Research methodology3.1 Sampling3.2 Sample Size3.3 Data Collection3.4 Data Analysis3.5 Questionnaire3.6 Location of Research3.7 Research Design3.8 Frequency Distribution3.9 Dependent Variable
14-19
4.0 Conclusion 20
5.0 Reference 21
6.0 Coursework 22-25
1.0 Introduction
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Background of Air Asia
Air Asia Berhad (MYX: 5099) is a Malaysian-based low-cost airline. Air Asia
is Asia's largest low-fare, no-frills airline and a pioneer of low-cost travel in Asia. Air
Asia group operates scheduled domestic and international flights to over 400
destinations spanning 25 countries. Its main hub is the Low-Cost Carrier
Terminal (LCCT) at Kuala Lumpur International Airport (KLIA). Its affiliate
airlines Thai Air Asia and Indonesia Air Asia have hubs in Suvarnabhumi Airport and
Soekarno-Hatta International Airport respectively. Air Asia's registered office is
in Petaling Jaya,Selangor while its head office is at Kuala Lumpur International
Airport. Air Asia plans to open ASEAN regional headquarters in Jakarta by August or
September 2011. The airline itself will maintain its headquarters in Kuala Lumpur for
the time being.
Air Asia won the Sky trax World's best low-cost airline award in 2007, 2009, 2010
and 2011. It has the world's lowest operating costs at USD 0.035/seat-kilometre in
2010. It is also the first airline in the region to implement fully ticketless air travel.
Establishment
Air Asia was established in 1993 and began operations on 18 November 1996. It was
originally founded by a government-owned conglomerate, DRB-Hicom. On 2
December 2001 the heavily-indebted airline was bought by former Time
Warner executive Tony Fernandes's company Tune Air Sdn Bhd for the token sum of
one ringgit (about USD 0.26 at the time) with USD 11 million (MYR 40 million)
worth of debts. Fernandes turned the company around, producing a profit in 2002 and
launching new routes from its hub in Kuala Lumpur, undercutting former monopoly
operator Malaysia Airlines with promotional fares as low as MYR 1 (USD 0.27).
Second hub
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In 2003, Air Asia opened a second hub at Senai International Airport in Johor
Bahru near Singapore and launched its first international flight to Bangkok. Air Asia
has since started a Thai subsidiary, added Singapore itself to the destination list, and
started flights to Indonesia. Flights to Macau began in June 2004, and flights to
mainland China (Xiamen) and the Philippines (Manila) in April 2005. Flights
to Vietnam and Cambodia followed later in 2005 and to Brunei and Myanmar in
2006, the latter by Thai Air Asia.
Expansion abroad
On August 2006, Air Asia took over lines’ Rural Air Service routes in Sabah and
Sarawak, operating under the Fly Asian Xpress brand. The routes were subsequently
returned to MA Swings a year later, citing commercial reasons. Air Asia's CEO Tony
Fernandez subsequently unveiled a five-year plan to further enhance its presence in
Asia. Under the plan, Air Asia proposes to strengthen and enhance its route network
by connecting all the existing cities in the region and expanding further into Vietnam,
Indonesia, Southern China (Kun Ming, Xiamen, Shenzhen) and India. The airline will
focus on developing its hubs in Bangkok and Jakarta through its sister companies,
Thai Air Asia and Indonesia Air Asia. With increase frequency and the addition of
new routes, Air Asia expects passenger volume to reach 18 million by the end of
2007.
Route expansion
On 27 September 2008, the company had on its list 106 new routes to be added to its
then-current list of 60. The number of old routes discontinued has not been publicly
disclosed. On 2nd of April 2012 Air Asia had their first flight from Sydney to Kuala
Lumpur. Sebastian Texan-Anderson was one of the lucky few to be on this historical
flight.
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Alliance
In August 2011, Air Asia agreed to forge an alliance with Malaysian Airlines by
means of a share swap.
1.2 Problem Statement
1.2.1 Is the advertisement broadcast Air Asia reaching their target market?
1.2.2 Is the promotion and advertisement is effect by the demography factors?
1.3 Research Scope
Advertising and promotion offer a news function to consumers. Viewers of ads learn
about new products and services available to them, much like they learn about events
in the news. This information function has a neutral role. It provides facts without
approval or disapproval from consumers. Customer behaviour at this stage
encompasses expressions of curiosity.
Consumers have a rational response to advertising when they look at the features of a
product or service. This response focuses on a logical listing of all the functional
aspects of the offering. This is an intellectual response, rather than an emotional one.
When customers weigh benefits, they become emotionally involved with advertising
and promotion. Consumers identify ways the product or service can make them
happier, improve their lives or give them pleasure. This part of the consumer response
is irrational and can lead to impulse buying and competition to obtain the product.
Repeated advertising messages affect consumer behaviour. This repetition serves as a
reminder to the consumer. Behaviour that stems from reminders includes suddenly
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thinking of a product while shopping and making a decision to buy it, as if it had been
on the consumer’s "to-do" list.
Consumer behaviour splits between loyalty and alienation depending on how well the
product lives up to its advertised benefits. Corporate behaviour – such as scandals or
charity work – can also affect alienation and loyalty responses. Once the consumer
makes this choice, advertising and promotion are not likely to undo that decision.
1.4 Research Objective
1.4.1 To evaluate the Air Asia marketing activities ( promotion and advertisement) in
influencing the passenger to choose to fly with Air Asia
1.4.2 To distinguish is there any relation on demography with the awareness of
advertisement
1.5 Significant of The Study
1.5.1 The Advantages of Promotion Air Asia
Malaysia Airlines will lay off 6,500 workers and surrender 96 domestic routes to
budget airline Air Asia under a major restructuring plan that will end 59 years of near-
monopoly in the nation's aviation market.
The state-owned airline will be left with only 19 domestic routes and it will lose all
government subsidies as of August 1, the prime minister's office said in a statement
late Monday.
Air Asia, Southeast Asia's biggest low-cost carrier by fleet, will also fly the 19 trunk
routes in competition with Malaysia Airlines, the statement said.
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The airline will continue to operate as a full-service airline, while Air Asia will stick
to its no-frills business model, providing distinct choices to customers on the 19
routes, it said.
The restructuring comes amid efforts by the government to reduce state expenditure,
while Malaysia Airlines also strives to become profitable and shed its unsavoury
reputation for corruption and mismanagement.
1.5.2 The Advantages of Advertising
Advertising Air Asia is the most important tool in the marketing of products and
services. Companies all over the world universally accepted this fact. The expenses on
advertising Air Asia are considered to be a profitable investment that reaps profits
both in the long and short run. Businesses that keep on advertising Air Asia regardless
of rise or fall in the economic times get a competitive advantage over those that cut
their ad budgets. There are many benefits of advertising Air Asia which include:
1.Information to the customer.
Advertisement Air Asia about new travelling keeps the customer informed about the
new airlines. They help to provide them information regarding the newly airlines.
2.Takes care of customers.
Advertising Air Asia takes care of customers. It helps in holding on to the loyal
customer, decreasing the number of lost customers and enlisting new customers. Thus
the overall effect of advertising Air Asia is increase in the number of customers that
will gradually become loyal to the product.
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3. Alters the attitudes of people.
An effectual advertisement Air Asia results in a swift change in the attitudes and
habits of the people.
4.Direct communication.
In earlier days customers believed on the opinions of retailers, when making the
purchases of products. With the rapid spread of media and advertising Air Asia to
every nook and corner of the world, people have become aware of the various
products that are available in the same category and the freebees and benefits of
purchasing them. So the companies or manufacturers are able to communicate their
message directly to the customers.
5. Increase employment.
Advertising Air Asia is a complicated task and a lot of people are involved in the
making of an advertisement. Research team, design team and many other people are
required to make and deliver it. So, advertisements generate employment for a lot of
people.
1.5.3 The Disadvantages of Promotion
As with most sales promotions, either the distributor or the business offering the
product are not profiting as much as previously. It is a calculated risk, but one that
needs to be planned and handled carefully to be truly effective. Sales promotions are
usually advertised to inform customers of the special offer. If there is a discrepancy
between what's published and the real offer, than it will be viewed negatively by the
public, states HKTDC. Retailers and distributors must ensure that whatever promotion
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is being published is honoured or the special offer will work against the company,
possibly tarnishing its reputation.
Promotions in sales are a disadvantage when they are offered too regularly. The key
to making them successful is offering them irregularly, catching the customer off
guard and unprepared. If they are provided too regularly then they create price
sensitivity among customers. Dryden outlines price sensitivity as intentional waiting
by customers to purchase items only when they are promoted in a sale, rather than
buying them at the regular retail price. Profits decrease.
1.5.4 Disadvantages of Advertisement
Advertising is an indispensable part of the marketing strategy of any product or
service. A proper advertisement has a great impact on the sales of the product and that
is why companies spend huge amount of money to make effective advertisements.
Needless to say, there are many advantages of advertisements.
a. Advertising can inform people about different products and services, their utilities,
cost and other requirements, and help us in making better purchases.
b. Advertisements of non-commercial issues like AIDS, Polio can help in educating
people and notifying them of events and programs related to them.
c. For advertisers, advertisements can help in attracting huge number of potential
customers and make positive impact about their products and services.
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d. Advertisements create a brand name for the product being promoted. People can
recognize the products from the catchy advertisements they see and thus sales are also
improved.
e. Advertising can lead to direct feedback from customers. It has been seen that a lot of
opinions are received by advertisers on their product/service, which helps in
improving the product/service.
1.6 Limitation of Study
The Sabah government has no say in the matter and hopes that Air Asia will not drag
it into the airline’s bid to stay put at the low-cost terminal more popularly known as
Terminal 2.
State Tourism, Environment and Culture Minister Datuk Masidi Manjun said: “It is
up to Air Asia to work out its problem with Malaysia Airports Berhad and the Federal
Government as they have the final say on how and where airlines should operate
within KKIA.”
Air Asia chief executive officer Datuk Tony Fernandez, during a special press
conference for the media from Sabah and Sarawak on Friday, said the airline was not
keen to move out of the Terminal 2 as its costs would increase and in turn force it to
reduce flights, causing Sabah to lose some one million tourists.
Fernandez said the state government had been cooperative but an official of Sabah
Tourism Board (STB) was among those causing some problems in the airline’s bid to
stay on at Terminal 2.
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Responding to Fernandez’ aspersions against the STB official, Masidi said: “STB
does not own or operate airports. In this case, KKIA is owned and operated by MAB,
a government -linked company under the purview of Transport Ministry.
“They decide how airlines operate at their airport, so for him (Fernandez) to suggest
otherwise is not just a misrepresentation of the facts but unfairly dragging STB into
the problem,” Masidi added.
Deputy Transport Minister Datuk Abdul Rahim Bakri said his ministry was surprised
by Fernandez’ stand on the matter as Air Asia had signed a letter of undertaking with
the ministry concerning the relocation to Terminal 1.
2.0 Background of Air Asia
The airline was established in 1993 and started operations on 18 November 1996. It
was originally founded by a government-owned conglomerate DRB-Hicom. On
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December 2, 2001, the heavily-indebted airline was purchased by former Time
Warner executive Tony Fernandes's company Tune Air Sdn Bhd for the token sum of
one ringgit. Fernandez proceeded to engineer a remarkable turnaround, turning a
profit in 2002 and launching new routes from its hub in Kuala Lumpur International
Airport at breakneck speed, undercutting former monopoly operator Malaysia Airlines
with promotional fares as low as RM1 (US $0.27).
In 2003, Air Asia opened a second hub at Senai Airport in Johor Bahru near
Singapore and launched its first international flight to Bangkok. Air Asia has since
started a Thai subsidiary, added Singapore itself to the destination list, and
commenced flights to Indonesia. Flights to Macau started in June 2004, while flights
to Mainland China (Xiamen) and the Philippines (Manila) started in April 2005.
Flights to Vietnam and Cambodia followed later in 2005 and to Brunei and Myanmar
in 2006, the latter by Thai Air Asia.
A new budget terminal, the first of its kind in Asia was opened in Kuala Lumpur
International Airport on 23 March 2006. Built at a cost of RM108 million (US $29.2
million) and spanning some 35,000 square metres (116,000 square feet), the Low Cost
Carrier Terminal (LCCT) is the new home for Air Asia Bhd. LCCT will initially
handle 10 million passengers a year. Air Asia Group is expected to carry 18 million
passengers in 2007.
Air Asia operates with the world’s lowest unit cost of US$0.023/ASK and a passenger
break-even load factor of 52%. It has hedged 100% of its fuel requirements for the
next three years, achieves an aircraft turnaround time of 25 minutes, has a crew
productivity level that is triple that of Malaysia Airlines and achieves an average
aircraft utilisation rate of 13 hours a day.
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Air Asia is currently the main customer of the Airbus A320. The company has placed
an order of 175 units of the same plane to service its routes and at least 50 of these
A320 will be operational by 2013. The first unit of the plane arrived on 8 December,
2005.
Competitive Advantages
Low cost airlines begin with two initial cost advantages arising from the very nature
of their operation: higher seating density and higher daily aircraft utilization. By
removing business class and reconfiguring their aircraft, low cost airlines can increase
the number of seats on their aircraft. Seat pitch of a low cost airline is usually 28
inches, compared to a traditional conventional economy class pitch with 32 inches.
Doganis (2001) calculates that should be able to operate at seat cost that are only 40-
50 % those of mainline rival. Combining the load factor benefit and beneficial
distribution cost, low cost airline’s cost per passenger can reduce price by one-third of
conventional airline.
Many low-cost airlines keep expenses down by flying out of secondary airports,
avoiding major hubs where takeoff and landing fees are much higher while still
getting passengers close enough to their destinations.
3.0 Research Methodology
3.1 Sampling
Respondents are randomly selected from Air Asia main airports. This is done so that
event spread (LCCT) of mixture sampling can be gathered. If the sample only be
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gather from them the main airport, which is in LCCT for Air Asia. The result will
only be for people from the Klang Valley and not all over the country.
3.2 Sample Size
The research will be done to 130 in order to achieve the objectives.
3.3 Procedure
The respondents will analyse by questionnaires Air Asia that distribute to the
passenger who are in the waiting area and will be collect immediately.
3.4 Data Analysis
After complete the collection of data, they will be analyzed by using SPSS 12 is in
order to get the results.
3.5 Questionnaire
Air line service like Air Asia has been a big success and threat for other airline service
in the country. Those days flying is only related to rich and wealthy people. But now
with the cheap fair, everyone can fly.
Air Asia has done a lot of promotion and advertisement to promote and create
awareness on their service. How effective is their promotion and advertisement is a
questionable. This Research is done to evaluate their effectiveness of the promotion
and advertisement by Air Asia and how it has effect the market.
This questionnaire contain question on how effective are Air Asia promotion
campaign and advertisement.
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Appreciate if you could spare some time to answer some of this questionnaire.
Part A
1. Sex ( ) Male ( ) Female
2. Age ( ) 15-19 ( ) 20-24 ( ) 25-29 ( ) 30 above
3. Occupation ( ) Executive ( ) Manager ( ) Student ( ) other
4. Race ( ) Malay ( ) Chinese ( ) Indian ( ) Other
5. Income per month
( ) RM100-RM1000 ( ) RM 1001-RM 2000 ( ) RM 2001-Above
6. Travel frequency a year
( ) 0-3 ( ) 4-6 ( ) 7-9 ( ) 10-More
7. Reason of travelling?
( ) Business ( ) Leisure ( ) Other ______________(Please State)
PART B
1. How did you find out about Air Asia
( ) Internet
( ) Friends
( ) New Paper / Magazine
( ) Others ______________
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2. Where did you find out about Air Asia Promotion ( you can tick more than 1
answer)
( ) Air Asia Website
( ) Face book
( ) News Paper
( ) Mailing list (email)
( ) TV / Radio
( ) Others___________
3. Do you find that Air Asia promotion and advertisement is doing well in
communicating their promotion to you?
( ) Yes ( ) No
4. How often do you check Air Asia website
( ) Everyday
( ) Once a week
( ) Every fourth night
( ) Once a month
( ) Casually
5. How well you remember this advertisement?
( ) Don’t remember at all
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( ) Remember the advertisement not the product
( ) Remember the Advertisement and the product
6. Is the advertisement understandable?
( ) Yes ( ) No
7. After viewing this ad, I would consider purchasing the product.
( ) Yes ( ) No
8. Do you think Air Asia tag line is catchy enough?
( ) Yes ( ) No
9. If yes, what your attention?
( ) The theme colour “ RED”
( ) Tag line
( ) Low price
( )others _________
10. Did you get your tickets at a promotion price?
( ) Yes ( ) No
11. How did you purchase your tickets?
( ) Online
( ) Counter
( ) Agents
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( ) Others_________
3.6 Location of Research
The research will be held at Air Asia main airports, LCCS Sepang. This is because for
the convenient location and it have the most passengers as it is the main airport.
3.7 Frequency Distribution
It allows us to obtain a number of responses associated with different values of one
variable and to express it in a percentage. In this study, frequency distribution is being
used in identifying the demographic and general information of the respondents.
3.8 Pearson’s Correlation
Pearson’s Correlation is method to find the correlation between 2 variables. The value
for a Pearson’s can fall between 0.00 (no correlation) and 1.0 (perfect correlation).
Other factors such as group size will determine if the correlation is significant.
Generally, correlation above 0.80 are considered pretty high.
3.9 Dependent Variable
It is the variable of interest of this research. The research goal is to understand the
dependent variable. For this paper, the dependent variables are as listed below:
3.9.1 Internet
The internet is where most of Air Asia customer does their transaction. This range
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from checking out the flight schedule to purchasing their tickets. Other than that it
also one of Air Asia medium of marketing where advertisement and promotion has
been launch and broadcast.
4.0 Conclusion
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A study by the Centre for Asia Pacific Aviation (2002) confirms that Asia continues
to offer attractive conditions for the air transportation industry. With thirteen out of
world’s top twenty-five major urban centres located in the Asia Pacific region and a
rapidly increasing urbanization trends, the Asian air travel market is bound to
continue to grow. Urbanization is highlighted as one of the key drivers for the growth
in air travel. It is estimated that Asia would account for 30% of the world market by
2019, or one third of growth between now and then. While the impact of SARS is
going to slow down the growth of Asian regional demand, the long-run forecast
continues to be very positive. These enable low cost airlines to grow even further.
5.0 Reference
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1. http://www.airasia.com
2. http://en.wikipedia.org
3. http://minotstateu.academia.edu
4. http://www.bryair.com
5. http://www.tribuneindia.com
6. http://www.flyertalk.com
7. http://etd.uum.edu.my
8. http://sandygarink.tripod.com
9. http://etd.uum.edu.my
10. http://www.mixologist84.com/
6.0 Coursework
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1. Briefly explain and compare the TWO categories of risks.
The first is volatility. From this perspective, deviations-positive or negative-from the
expected outcome constitute risk. Volatility is generally associated with the
statistical concept of standard deviation or, equivalently, variance. These measures
have the advantage that there is an explicit and relatively simple relationship
between the risks of individual assets and the risk of a portfolio of assets. Thus , it is
straightforward to incorporate volatility into the operational aspects of the portfolio
management process: portfolio construction, monitoring, and evaluation.
However, most clients find it difficult to grasp the link between portfolio volatility
and their ultimate goals because they do not view the possibility of achieving better-
than-expected returns as risk. This is especially true for individual investors because
they tend to associate risk with losing money rather than with uncertain returns and
their ultimate goals pertain to consumption of goods and services rather than portfolio
value. Institutional clients are generally more comfortable associating risk with
volatility. This is partly because institutional clients are often investment
professionals with a solid understanding of investment processes. In addition,
business plan and actuarial, studies typically provide an explicit link between their
ultimate goals, such as funding certain activities, and portfolio performance
objectives. Nonetheless, many institutional clients also find volatility to be an
insufficient measure of risk.
Risk me measures in the second category incorporate this view by focusing only on
outcomes below some threshold return. These “downside risk” measures are
especially useful when the distribution of potential asset returns does not resemble
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the familiar, symmetrical bell curve associated with the normal distribution.
Unfortunately the intuitive
Appeal of downside risk measures comes at an analytical cost: There is no clear,
reliable relationship between the downside risk of individual assets and the
corresponding downside risk of portfolios. Thus downside risk measures are more
difficult to incorporate explicitly into the portfolio management process.
2. List out components of the Investment Policy Statement.
Description of Client
The endowment fund support the mission of Walnut Lodge Camp. The camp
provides a camping experience for children with disabilities and fosters
independence and acceptance of others through social , recreational, and
educational aspects of life.
Purpose of the IPS
The purpose of this investment policy statement (IPS) is to establish a clear
understanding between the investor and the investment goals and objectives
and management policies applicable to the portfolio.
Duties of the Parties
The advisor shall be responsible for (1) designing, recommending, and
implement an appreciate asset allocation plan ; (2) advising the investor about
the selection of asset categories; (3) identifying specific asset within each asset
category; (4) monitoring the performance of all selected assets; (5)
recommending changes to any of the above; (6) periodically reviewing the
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suitability of the investments for the investor; (7) being available to meet with
the investor at the investor’s request; and (8) preparing and presenting
appropriate reports.
The investor shall be responsible for (1) oversight of the portfolio; (2) defining
the investment objectives and policies of the portfolio ; (3) directing the
advisor to make changes in investments policy, and overseeing and approving
or disapproving the advisor’s recommendations regarding policy, guidelines,
objectives, and specific investments on a timely basis; (4) providing the
advisor with all relevant information about the investor’s financial conditions
and risk tolerances and notifying the advisor promptly of any changes to this
information; and (5) ensuring the accuracy of all information provided to the
advisor for creation and monitoring of this investment policy statement.
Objectives
The investor desires long-term investment growth sufficient to maintain
inflation-adjusted support of the camp’s mission.
The investor’s income stability, insurance coverage, liquidity, and net worth
provide financial capacity to take increased risk. The investor indicates
willingness to accept occasional declines in portfolio value in order to enhance
growth potential .Taking both factors into account, the investor’s risk
tolerance may be characterized as moderate.
Constraints
Liquidity: The investor will maintain adequate liquid reserves outside the
portfolio.
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Time horizon: Indefinite.
Taxes: The investor is tax-exempt.
Legal and regulatory: Subject to the Uniform Prudent Investor Act (UPIA).
Unique circumstances: Leverage, short sales, and direct investment in various
types of securities are prohibited.
Asset Allocation Targets
Fixed income 40%
U.S./global 20/20
Equity 60%
U.S.(large/small) 24/12
International developed (large/small) 6/6
Emerging markets (large/small) 3.6/2.4
REITs 6
Guidelines for Portfolio Adjustment and Rebalancing
The advisor shall review the portfolio annually and rebalance the portfolio
back to recommended weights if the equity/fixed income weighting differs
from the target by more than 5 percept.
Schedule for Portfolio and IPS Reviews
The advisor shall provide the investor with appropriate reports on a regular
basic. The advisor and the investor should review this investment policy
statement together every two years.
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