CFA CFA Level 1 CFA Level III Question

CFA Level III Question

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    • artman3211

      Hey everyone! Here is a great question that i am stumped on and was wondering if i can get some advice. Imagine that you have just acquired a new client, Mrs. Brooks. Mrs. Brooks is 75 years old, has a $25 million investment portfolio, and her living expenses are $170 thousand per month. She has no other income source. Her portfolio asset allocation currently is 40% in U.S. large cap equities, 10% in U.S. small cap equities, 10% in international developed markets equities, 10% in emerging markets equities, 25% in 1-year maturity municipal bonds, and 5% in gold. Mrs. Brooks fired her former investment advisor because she was unhappy with her portfolio’s volatility and because the size of her portfolio has decreased significantly over the past three years. Mrs. Brooks had a bad experience with a hedge fund at one point during her life, so she won’t invest in a hedge fund ever again. Mrs. Brooks does not like investments with long lock-ups. Her stated risk tolerance is quite low; in fact she mentioned during the client-intake process that she gets quite upset if her portfolio has a negative return of greater than 0.1% per month. How would you go about building a portfolio for Mrs. Brooks or what investment portfolio/strategy would you recommend for Mrs. Brooks? How would you explain your recommendation to her?

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