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Portfolio Asset Allocation. Exploring the Case for Continued Reliance on Financial Economic Models by Asset Managers

In this paper, I address the theme of asset allocation in a pension fund portfolio using passive index funds and exchange-traded funds (ETFs). To illustrate this, I have created five model portfolios according to CAPM (Capital Asset Pricing Model) and MPT (Modern Portfolio Theory) models. My results are interesting because one of the five portfolios comes on top of the rest as a suitable portfolio for the pension fund. Since many investors are not experts, they usually leave the responsibility of managing their asset portfolios to asset managers. And in order to attract as many investors as possible to their boutiques, asset managers will harp on about their superior portfolio returns that beat the market. To beat the market they incur transaction costs which lower returns for investors. Most investors have come to acknowledge that capital markets are efficient thus the idea about beating them is a false proposition. In the face of this reality, asset managers and investors have turned to passive investment strategies. I conclude that superior asset allocation and passive index investing through exchange-traded funds form a unique set of tools for pension fund investment managers.§§Ibrahim Mbithi is the founder of IAN Media UG. He has been active in e-commerce as an online marketing consultant, web development and entrepreneur since college days. This has given him experience in Web Development, Domain Services, Online Marketing, Search Traffic Monetization and B2B Value Relations. Previously Ibrahim worked for various Organizations/Companies in Germany & Switzerland in Technology Sector. Ibrahim's role at IAN Media is to Oversee Strategy, Technology, Manage Teams and ...
EAN/ISBN : 9783656820284
Publisher(s): GRIN Verlag
Discussed keywords: Finanzierung, Wirtschaft
Format: ePub/PDF

Author(s): Mbithi, Ibrahim
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