CFAI Reading 18 Asset Allocations - Example 22

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sachin_patel

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The questions that the current allocation is below.
  • endowment that is invested 45 percent in US equities, 15 percent in non-US developed market equities, and 40 percent in US Treasury Inflation-Indexed Securities (often called TIPS)
  • IPS authorizes tactical ranges of plus or minus 10 percent in each asset class
  • Davenport has suggested a 55/5/40 US equities/developed market equities/TIPS tactical asset allocation.
The question asks if the recommanded allocation is feasible..
The answer says “Davenport’s TAA suggestion is just within the tactical ranges allowed by the endowment’s IPS. Therefore, the suggestion is feasible.”
To me, developed market equities is not in the range(13.5 to 16.5).. .. Am I missing something?
Thanks,
 
The ±10% means 10% of the portfolio, not 10% of the target allocation to that asset class.
The ranges are:
  • US equities: 35% – 55%
  • Non-US develped market equities: 5% – 25%
  • US TIPS: 30% – 50%
 
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