Fund Selection - Pension Fund

The purpose of the analysis is to create a long-term investment portfolio as retirement plan matching our client’s IPS which comprises her time horizon, liquidity needs and risk tolerance. The portfolio is dedicated to risk-averse investor seeking simplicity, stable income, flexibility and limits to downside risk. Our client has investment time horizon of 35 years with low risk exposure. Objective of the investor is to ensure financial stability to live on after retirement after age of 65.

In general, asset allocation is the most important determinant of total return and risk for a broadly diversified portfolio over the long term. It is important that the allocations attain an appropriate balance between maximizing long-term growth and managing risk matching her investment profile.

We offer a combination of services that are ideal for retirement investor. They are especially well-suited for investor profile. Diversification is the first line of hedging against risk, so we decided to diversify portfolio combining of equity, bond alternative investment products.

Vanguard Institutional Index Fund

To creating comprehensive retirement portfolio providing, value-added retirement services and meet client future expectations, we decided to allocate majority of our investment capital in passively managed equity Vanguard fund replicating S&P 500 index. The main reason to choose this fund was positive relation to our customer’s risk-return profile. In addition, the fund has the lowest expense ratio within its assets class investment funds together with good Morningstar rating of 4 and highest Sharpe ratio. It means that the fund generates higher and stable returns per unit of risk.

Metropolitan West Total Return Bond Fund

The fund pursues its objective by investing, under normal circumstances, at least 80% of its net assets in investment-grade fixed-income securities or unrated securities that are determined to be of similar quality. Up to 20% of the fund’s net assets may be invested in securities rated below investment grade. Metropolitan West Total Return Bond Fund with investing in grade bonds are supposed to be a port in the storm when the financial environment gets rough. Although, expected return of fund is lower compared to the others, it has the highest Sharpe ratio thanks to lower risk.

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