Strategic Asset Allocation
This strategic asset allocation generally referred as SAA is used for making the investment portfolio for the person or company who is going to invest the money in any form or as assets. The sensible framework used for this kind of investment portfolio depends on the management of the investor’s wealth. This methodology is based on high in-depth investment and bond analysis which caters the financial requirement. Mainly it is based on the current financial markets with some future financial marketing forecasts.
This is basically a combined analysis of market trend, future financial market and investor’s risk taking ability. This investment strategy is done for longer period of 10 years or more than it. Major assets investment which will maximize the return can be done for 50 years and onwards. For this the analysis of returns, volatility and financial correlation with the markets for the last 20 years is necessary for correct forecasting of the return in next 10 years or more. The inflation will be constant such as on average of 2.6 % annual. Based on the above analysis we can say that the 18 % of the total investment should be allocated to the hedge funds because it will give you the minimum return of 2.6 percent annually.
Therefore the allotted budge for Hedge fund in the investment portfolio above is up to the correct assumptions.