Problem
Mr. Philips has a conservative to moderate risk preference. Currently, the following assets are available for use in building an appropriate portfolio for him:
$10.0 million cash (from sale of the private company interest, net of a $10 million that he planned to give to charity)
$10.0 million stocks and bonds ($5 million each)
$ 5.0 million in Mr. B. Philips is 60 years of age and is planning to retire in the next four years . He is in excellent health, pursues a simple but active lifestyle, and has two adult children. He has interest in a private company for $20 million. As part of his estate planning he has decided that he will donate half of this to a charity upon his death. He now realizes that an appropriate investment policy and asset allocations are required if his goals are to be met through investment of his considerable assetsinvestment property (now fully leased)
$ 10.0 million value of his residence
$35.0 million in total available assets
Task
a. Formulate and justify an investment policy statement for each investor setting forth the appropriate guidelines within which future investment actions should take place. Your policy statement should encompass all relevant objective and constraint considerations.
b. Recommend and justify a long-term asset allocation that is consistent with the investment policy statement you created in Part a. Briefly explain the key assumptions you made in generating your allocation.
NB. An assessment of each investor current situation should be given in order to develop an appropriate investment strategy.
Your policy statement for your client should address the following specifics
Objectives of the investment strategy
a) Return requirement
b) Risk Tolerance
Constraints
a) Time Horizon
b) Liquidity requirement
c) Taxes
d) Legal and regulatory
e) Unique circumstances.