3. Create 3 Asset Allocation(s) (up to 30% - maximum 1500 words): The SEF’s BoD would like to evaluatethree different SAA, using three different portfolio construction techniques. Each asset...

1. An optimized Mean- Variance SAA: MV Optimized
The MPT is a mean-variance theory that contrasts a portfolio's anticipated (mean) return to the variance of the same portfolio. A portfolio on the efficient frontier, on the other hand, indicates the composition that provides the best potential anticipated return for a given risk level. The method of evaluating risk, represented as variance, against expected return is known as mean-variance evaluation. Mean-variance assessment is used by stakeholders to determine financial decisions. Investors consider how much risk they are ready to accept in return for varying degrees of profit. Mean-variance analysis enables investors to identify the highest reward at the lowest risk for a certain amount of return. Mean-variance analysis is a component of cu
ent portfolio theory, which believes that if shareholders have comprehensive information, they would make sensible investment decisions. One common misconception is that investors prefer little risk and large gain. The variance and anticipated return are the two major aspects of mean-variance analysis. Variance is a statistic that reflects how diverse or dispersed the numbers in a collection are. In cu
ent portfolio theory, an investor would select several assets to invest in based on their amount of variation and projected return. This concept's purpose is to distinguish investments, which lowers the danger of catastrophic loss in the case of quickly changing market conditions (CFI, 2021)
I. No leverage or Short selling
II. Required return based on the return objective
III. Ensure a defense: growth bias as established in Section 1 above.
IV. Constraints on two of the three risk measures. The remaining risk measure will be minimized
Analysis
Following are the Assets with optimal weights:
Bloomberg Barclays US Aggregate: To simulate the market universe of bonds, the index comprises government Treasury securities, corporate bonds, mortgage-backed securities (MBS), asset-backed securities (ABS), and municipal bonds.
Bloomberg Barclays US Government: The Bloomberg Barclays US Government Bond Index includes the US Treasury and US Agency Indices.
Bloomberg Barclays US Corporate Investment Grade: The Bloomberg Barclays US Corporate Bond Index is a gauge of the market for investment-grade, fixed-rate, taxable corporate bonds. It covers publicly traded USD-denominated securities issued by US and non-US industrial, utility, and financial issuers.
Bloomberg Barclays EM Aggregate: EM Aggregate Bond Index (MVEMAG), which contains both investment grade and sub investment grade rated governmental and corporate bonds denominated in US dollars, Euros, or local emerging market cu
encies (Tracknight, 2021)
We conducted the evaluation in accordance with the requirements, and the findings are as follows:
· A portfolio made up of numerous types of securities is thought to be a better strategic move than a portfolio made up of only one form of investment. Mean-variance analysis may be a valuable component of an investing plan.
· Weights of the portfolio 75% investment...