Balanced Fund

Running head: BALANCED FUND
Balanced Fund
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Name of the University:
Author’s Note:

1BALANCED FUND
Balanced Portfolio
The Balanced Investment portfolio was constructed using the notional amount of $A1
billion, which was diversified with the preference of the investors. The type of investor studied
for this type of fund is the moderate risk averse investors whose risk preference towards the
assets is inclined by the amount of the return the assets class generates (Chow et al. 2014). The
wide class of investment, which were considered for investing, were the cash and cash
equivalents, fixed deposits domestic, fixed deposits in overseas, equity investment, real estate
and private equity were the type of assets class selected. The whole portfolio was viewed from
the context of equity and debt investment. The assets class selected are risky and less risky and
the weightage for the same has been allocated using the funds general principles and guidelines.
The recommendation and the weightage for the same assets class was provided after reviewing
the performance of the assets class and the risk clientele effect of the investors. The risk and
rewards of the investor towards the assets class was given in the recommendation section of the
assignment. The return provided by the assets classes can be more than the required rate of return
from the portfolio that is around 3%. The allocation of assets class was done accordingly to
achieve the return target demanded. The assignment also kept several economic factors under
consideration such as Inflation Rate, Country Risk, Sovereign Risk, International taxation and
Currency price movement were some of the key external or economic factors considered while
investment and making the fund (Guerard, Markowitz and Xu 2015).
The diversification benefits would be one of the main advantage the balance fund will
provide in term of assets class to the investors. The balanced fund is a blend of different assets
class that has different characteristics. The beta of the assets class selected ranges from 0 to 1.
The benefits of the fund will be in term of exposures to the short-term funds and deposits in the

2BALANCED FUND
form of the cash and cash equivalents. While the exposure to assets class such as the equity class
will provide the investors with the exposure to the capital market. The empirical evidence for the
balanced fund shows that the consistency in the form of returns to the investors in the volatile
economy and macro-economic conditions. The balanced fund has proven to provide a
sustainable and better economically efficient returns form the equity-oriented returns where the
exposure and volatility to the economy and market is generally high. The risk and reward for the
same is high and the beta for such assets class is generally is high (Ackert, Church and Qi 2015).
The risk hierarchy among the assets class is defined below:
Figure 1: Classification of Assets
The difference of risk preference and the difference or risk and return preference among the
investors make them the suitable investors according to their assets class. For the reason there,
reason of varied risk and rewards preference the investor can select the fund like the Balanced
Fund, which is less risky or the Equity Fund, which is risky. The percentage of asset allocation or

3BALANCED FUND
the weights to each assets class in this type of fund are given according to the type of fund
(Liagkouras and Metaxiotis 2015).
Balanced Fund
Asset Class
Risk
Associat
ed
% of
Assets
Invest
ed
Cash and Cash Equivalents Low 10%
Fixed Deposits Domestic Low 45%
Equity Class Medium 20%
Real Estate/Assets High 15%
Overseas Fixed Deposits Medium 5%
Private Equity High 5%
Total 100%
Table 1: Balanced Fund Overview
Figure 2: Balanced and Equity Fund Overview
10%
45%20%
15% 5% 5%
Balanced Fund
Cash and Cash Equivalents Fixed Deposits Domestic
Equity Class Real Estate/Assets
Overseas Fixed Deposits Private Equity
5% 5%
35%
30%
5%
20%
Equity Funds
Cash and Cash Equivalents Fixed Deposits Domestic
Equity Class Real Estate/Assets
Overseas Fixed Deposits Private Equity