1.
a
.Ma
tur
epe
nsi
onf
und:
In
v es
tmentObje
cti
ves
Returnr
equir
ement:Re
turnmustexc
eedt
hefund’
sac
tua
ria
ll
ya ss
ume dr
ateof
r
eturnbase
dinpartontheant
ici
pat
ed5% r
atef
orwagec
ostinc
rease
s.
Ri
sktol
eranc
e:Proximit
yofpay
outsli
mitst
ole
ranc
eforr
isktaki
ng.Asa
r
esul
t,t
heport
fol
io’sass
etmixs
houldlea
ntowardi
nte
rmedia
te-mat
uri
tyfix
ed-
i
ncomeasset
sofre
la t
ive
lyhi
ghqua
lit
y.
In
v es
tmentConst
rai
nts
Liqui
dit:Pr
y oxi
mityofpayout
sr e
qui
resl
iqui
dit
yabovet
hatr
equi
redf
orl
ess
ma t
urepl
ans.Thi
saddit
ionall
iqui
dit
ymayl i
mitre
tur
ns.
Ti
mehori
zon:Aga
in,ma
tur
it
yofplanr
esul
tsinanemphasi
sonas
hor
t-t
o
i
nte
rme
diat
e-t
ermti
mehori
zon,whi
chmaylimitr
etur
ns.
T
axc
ons
ide
rat
i :Non-
ons taxa
ble
.
Regul
atoryandl
eg :Fe
al der
al(
U.S.
-ERI
SA)a
nds
tat
ela
wswi
lla
ffe
cta
sse
tmi
x
andquali
ty
.
b
.Cons e
rvativ
ee ndowme ntfund:
In
vest
me ntOb j
ecti
ves
Ret
urnrequirement:Retur
nmus tme etore
xceed5% spe
ndingrat
ewith3%
i
nfla ti
onr at
e.Returncanbef r
om incomeorcapit
alga
insbutbudg
et
re
quir
eme ntswouldplacetheemp ha
sisoninc
ome .Inflat
ionconsi
dera
ti
ons
re
quir
esomec ons
iderat
ionoflong-t
erm gr
owth.
Ri
skt
ole
rance:Witha8.15% (
1.05 1.
03–1=. 0815)r
etur
nobje
cti
ve,
mode
rat
elev
elofrisktol
era
ncemayberequi
redbutthec
erta
int
yofre
tur
nwi
ll
t
empert
hisr
isktol
erance
.
In
v es
tmentCons
trai
nts
Liqui
dit
y:Budgetneedswi
llr
equi
res
omel
iqui
dit
ytome
ete
xpe
nse
s;t
hisma
y
l
imitret
urns
.
Ti
mehori
zon:Budg
etcons
ide
rat
ionswi
llr
equir
efundin
gimme di
a t
ene
edsbut
i
nflat
ionconsi
der
ati
onsr
equir
esomeatt
ent
iontoalonge
r-t
erm gr
owt
hhoriz
on.
, Chapter 22 - Investors and The Investment Process
T
axc
ons
ide
rat
i :Non-
ons taxa
ble
.
Regulat
oryandl egal:Stat
eregula
tion.
Itwouldalsobei mportanttore
cognizethedichot
omyofob j
ect
iv
e soft
he
endowme ntfund:ma ximizi
nga s
suredretur
nstofundc urr
e ntneedsovera
short
-t
ermt i
mehor izon,andma ximizi
ngmor eriskyretur
nst oma i
ntai
nlong
-
ter
mr ealval
ueoft hee ndowment’
spr i
ncipalv
a l
ueo v
eral ong-t
ermt i
me
hori
zon.
c
.Lifeinsurancecompanys pec
iali
zinginannuit
ies
:
I
nves
tme ntOb j
ect
ives
Ret
urnr equi
rement:Returnshouldexce
e dnewmoneyra
tebysuffic i
entma
rgi
n
t
ome etexpensesandprofitob j
ecti
ves
.Lo wermini
mum a
ccumul
ati
onr
ate
t
empe r
sre t
urnobject
ive
.
Risktol
erance:Wit
ha7% ne wmone yret
urnobje
cti
ve,moder
atel
eve
lofri
sk
tol
eranc
ema ybere
qui
red,butc
ert
aintyofret
urnandavoi
danc
eof
rei
nvest
me ntrat
eri
skvi
rtual
lymandatest
heuseofanimmunizedfix e
dincome
port
foli
o.
In
v es
tmentConst
rai
nts
Liqui
dit
y:Someliquidi
tymayberequi
redfors
urrende
rsa
ndr
oll
ove
roff
unds
t
opr ot
ectag
ains
tlockin
ginnoncompet
it
iverat
es.
Ti
mehorion:Sh
z ort
ert
hannor
malt
imehor
izonbe
caus
eannui
ti
esa
res
ubj
ect
t
odis
int
ermedi
ati
on.
Taxconside
rati
ons:Aminorf
act
orbe
caus
ecompet
it
ionwillr
equi
reahi
ghr
ate
ofre
turn,mostofwhic
hwilla
ccumul
at
efort
hepol
icyhol
dera
ndthusno
tbe
sub
jecttota
x.
Regul
ator
yandl
eg :Si
al gni
fic
ants
tat
ere
gul
ati
onwi
lla
ffe
cta
sse
tmi
xand
qual
it
y.
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