stanford endowment fund - asset allocation

Final Report

Stanford Endowment Fund

Analysis Portfolio Management

Riesling Fonds : Sulaiman Butiban, Saisai Guo, Kuangda Xu, Kun Yang,

Guiyun Zhang, Wanxin Zhang, Pei Zheng

12/4/2015

Riesling Fonds Portfolio Management

1

Fund Introduction

Stanford Endowment

Stanford Endowment is designed to optimize long-term returns, create consistent annual

payouts to the University’s operating budget and preserve purchasing power for future

generations of Stanford faculty and students. The endowment fund is now managed by The

Stanford Management Company (SMC) which is a division of the university with oversight by

the university board of trustees.

As of Aug. 31, 2015 (the end of Stanford’s fiscal year), the value of the endowment was $22.2

billion, an increase of 3.6% over the previous year. (The change in endowment value results

from investment gains and losses, endowment gifts and other funds transferred into the

endowment, offset by the annual payout for university operations). The university's endowment

payout for fiscal year 2015 was $1.06 billion, equal to 4.9 percent of the beginning-of-year

endowment value.

According to the 2014 endowment investment annual report, the strategic asset allocation is

like following. There are 6 asset classes, including the public equity, private equity, absolute

return, natural resources, real estate, and fixed income. The report shows a really excellent

overall return of 16.8%, largely beating the benchmarks, which include the inflation rate, the

Stanford composite benchmark, the 60% Equity/40% Bond composite. In addition, most of the

individual asset class outperformed the benchmark respectively.

Our Fund

Our Riesling Fund is committing to allocate capital into high quality investment universe to

provide stable excess return by implementing professional active investment strategy, including

abroad asset allocating to seek potential economic growth around the world. This philosophy

matches the quality of education and brand name of Stanford. We are pursuing an active

management, higher return along with controlled risks. We have a global diversified strategy

for Stanford endowment fund.

Asset allocation sort by asset class Target

Public Equity 25%

Private Equity 23%

Absolute Return 22%

Natural Resources 12%

Real Estate 8%

Fixed Income 10%


2

Economic Outlook

United States’ Economy

Monetary policy change: The Fed is most likely going to hike interest rate in 2 weeks. The latest

news is that the Fed is signaling the hiking rate in this month meeting. Janet Yellen is confident

for the US economy grows at a moderate path. She was "looking forward" to a U.S. interest

rate hike that will be seen as a testament to the economy's recovery from recession.

For now, the core inflation is approaching to the target range, and the nonfarm payroll has been

picking up. In the labor market, although the natural full employment rate has not been realized,

the unemployment rate reached its lowest record since 2008. Also, housing market is gradually

recovering. The average of house price is increasing. Meanwhile, the consumer spending is

growing, which bring a huge positive impact to US economy, because consumption takes up to

almost 70% in US GDP.

Taking advantage of the QE program and extremely low interest rate, the US financial market

is booming. US stock market has been a bullish for a long time since 2009, and the bond yield

keeps decreasing. With the hiking coming to the table, the financial market would adjust and

react. However, we expect the market would recover because the solid and healthy fundamental

economy have been proved by the raising interest rate. However, in the long run, the economy

is full of uncertainties, including the vague of wage increasing, the clasped of crude oil and the

weak global economy prospect. Still, in the forecastable future, we are confident at US equity

market and we predicted the S&P500 will still increase.

As for the bond market, it would provide stronger cash flow payment and lower credit risks to

investor because of the bright outlook of economy, although the interest raising would put the

bond price down. Interest rate gain would take larger proportion in the bond investment. We

expect the 10y-2y treasury yield spread would narrow due to the short-term interest rate is going

to raise, while the long term economy perspective growth is still uncertain, pressing the

increases of the long run yield.

(Please refer to the next 2 pages that presents illustrations from the Bloomberg terminal. See

Charts from 1-6)


3

(Chart 1: US GDP)

(Chart 2: US Core CPI)

(Chart 3: US Unemployment rate)


4

(Chart 4: US Housing sales)

(Chart 5: S&P 500)

(Chart 6: US 10Y2Y Spread)


5

Eurozone & Germany’s Economy

For now, the ECB decided that the interest rate stay in closely 0.25%. At the same time, since

March 2015 the ECB has executed the bond-buying program. Such policies are expected to run

through to September 2016. The intend of easing-money policy is to eject liquidity into the

financial system, decrease the long-term interest rate, stimulate the industrial investment and

consumer spending, and finally, lift up the inflation rate and boost the economic growth. The

latest news in Dec.3rd 2015 is that ECB decided to extend the asset-purchase program to March.

2017, and could be extended further if the annual inflation rate doesn’t rise quickly enough.

Inflation increase in Eurozone keeps stable but not enough to reach the policy target. Export

growth is on the recovery but still sluggish due to the global demand decreases. Euro currency

is still on the track of weakening.

Germany is the fourth largest economy entity in the world and the largest within Euro Area.

In 2015, GDP growth stays stable. Analysts estimates the recovery of Germany economy is on

the moderate and stable pace, approaching to 2% GDP growth rate in the next three years.

Furthermore, the PMI, the critical leading economic activity indicator, is around 54 over past

three years, far more away the 50 threshold. It signals that manufacturing industry is

continuously expanding. Overall, German economy has been stable despite all the challenges

the global economy has faced.

Germany is the second largest exporter in the world and exports account for more than one-

third of national output. But the data signals that a weak global demand environment. Due to

the sluggish growth in China, one of the most important importer for Germany, in larger extent

that the exports will be determined by the prospect and recovery of Chinese market. At the Euro

zone, the other member countries are still in fragility expansion, dragging the Germany’s

exports. Also, the exports of Germany are influenced by the US economy grow lingeringly. So,

the expectation for the exports is that the exports would still assume the downside risk due to

the external weak environment.

Indeed, Germany economy is the best in the Eurozone. Such sustainable economy development

is shown in the financial market. DAX performed best compared to other stock markets. With

the QE expansion and more stimulus policy coming out, the Germany financial market would

stay up trend. Also, based on the healthier and resistant economic structure, the Germany stock

market is more likely surpass other markets in Eurozone.

The newest booming point is the concept of Industry 4.0. This is the German vision for the

future of manufacturing, one where smart factories use information and communications

technologies to digitize their processes and reap huge benefits in the form of improved quality,

lower costs, and increased efficiency. The German government is investing €200m to spur the

Industry 4.0 research across government, academia, and business. In the future, the advanced

technology and manufacturing sector would become the fresh new engine of the Germany

economy.


6

Other aspects, Germany auto-industry is suffering the Volkswagen emission scandal and

refugee crowding. Meanwhile, the numbers of the aging people is still increasing. Such issues

are supposed to be closely watched.

(Please refer to the charts for illustration purposes from the Bloomberg terminal. See Charts

from 7-12)

(Chart 7: EUR/USD)

(Chart 8: Germany GDP)


7

(Chart 9: Germany PMI)

(Chart 10: Germany DAX)

(Chart 12: Germany Export)


8

China’s Economy

Economic growth slow down to a moderate pace. Analyst expect China would fall to 6% to 6.5%

during next 3 years.

Since China is one of the largest producers, so we believe it is important to look at

PMI(purchasing managers' index) index which is a powerful indicator of manufacturing sector,

an index score over 50 indicates future expansion, and vice versa.

PMI is still less than 50 at current level, which indicates future contraction of the manufacturing

sector. A future contraction of manufacturing sector in China would have an adverse effect on

the global economy recovery. Also, other high-frequency indicators like the trade, electricity

output, steel usage, auto sales continue to step down, because not only the demotic weak

economic activity but also the negative impacts from outside sluggish global demand.

Based on the continued downside risk in economy, the monetary policy would keep loose to

support and stimulate the economy. We expect the PBOC would continue easing the credit by

cutting the interest rate and reserve requirement ratio.

However, China’s economy is experiencing transition and a structure reform. A decreasing PMI

could also indicate old manufacturing industry is gradually stepping out while a new and more

advanced economy is developing. The government call for and support a change from

Investment-driven to consumption-oriented. Therefore, the consumption related industry would

be the spotlight in the following years.

As the latest data shows, the retail sales growth, especially the online sales. Real retail sales

growth picked up to 10.9% y/y in September (Aug: +10.8%), with YTD online sales up a strong

36.2% y/y. Also, the expectation in retail sales keep promising in the next 2 years.

At the same time, the government is executing a stricter regulatory to the financial market since

the stock market crashed in June. A series of reform policy have been released. Promoting the

capital market to serve for fundamental economy has become the priority. We still look forward

a favorable financial environment and high-efficiency financial system happened in the future.

Meanwhile, the government is finding a new engine and making its effort to largely support the

all of the entrepreneurial business, especially the internet technology and E-commerce entity,

which attract more and more capital and talented people coming in.

Finally, the Chinese yuan has been included in IMF a basket of currency reserve and designated

into SDR, which boost foreign investor confidence to hold Chinese yuan assets. Also, such

success would push China to deepen the economy reform.

(Please refer to the next page that presents illustrations from the Bloomberg terminal. See Charts

from 13-14)


9

(Chart 13: China GDP)

(Chart 14: China Retail sales)


10

Japan’s Economy

The Bank of Japan would keep ejecting the liquidity into the market due to the latest negative

GDP quarterly data, which means an economy recession. Analyst expects the extremely low

price growth could not be figured out in the short term. Stimulation policy would continue

bumping up the financial asset price.

However, one of the most influential factor of stagnant economy is the aging people issue,

which would probably press the long term economy growth.

(Please refer to the charts below that presents an illustrations from the Bloomberg terminal.

Charts from 15&16)

(Chart 15: Japan GDP)

(Chart 16: Japan CPI)


11

Strategy & Asset Allocation

Given the perpetual nature of the University, the current Stanford endowment investment

horizon is long-term. Their objective is to generate maximum total returns for an appropriate

level of risk. The strategic asset allocation is listed below:

According to their predictions on inflation and other economic factor, they expect the real

endowment return to be 8.2% in the upcoming three years.

We took both portfolio volatility and spending volatility into consideration and we found that

there is a growing trend of operating expense in Stanford’s current investment. Thus, the risk

tolerance would be slightly higher within the next 3 years of investment horizon in order to

meet the spending projection of the university. In terms of fund return, the endowment fund

serves the purpose as a permanent asset base to fund for specific activities, hence our

investment must at least preserve the real purchasing power after inflation adjustment.

The liquidity requirement for an endowment fund is generally low since emergency needs are

unusual thus we would consider alternative investment for our asset allocation.

Our investment philosophy is that we want to gain a broad exposure of different type of assets

with respect to different markets all over the world, in order to generate sustainable cash

flows in the next three years, we are trying to maximize the dividend and coupon yields of our

portfolio more than capital gain yield. Specifically speaking, our strategy will focus more on

passive investing and only slightly on active. We will be investing be investing in ETF and

some options of commodities which we think are on the verge of rapid growth. The ETFs

these across sectors in China, Japan, Germany as well as domestic US. Our recommended

asset allocation is listed below for more details look at the Apendix:


Public Equity 25%

Private Equity 23%

Absolute Return 22%

Natural Resources 12%

Real Estate 8%

Fixed Income 10%


Public Equity 43.6%

Real estate 25.7%

Absolute Return 11.5%

Commodities 11.6%

Fixed Income 7.6%


12

We expect our portfolio would generate a 12% return annually, and the composited benchmark,

which is defined as the target-weighted combination of S&P 500, DAX, NIKKE 225 and SH

composite index, would increase about 8% annually. We hope our investment would beat the

benchmark by 4%. The tracking error would be around 10%-12%. In the next section of the

report we propose our investing strategy by specifically looking at each country.

Real Estate 26%

Equity 44%

Fixed Income8%

Absolute Return11%

Commodity11%

ASSET ALLOCATION

Germany29%

US42%

Japan23%

China6%

ALLOCATION BY COUNTRY

Asset allocation sort by country Target

US 42.3%

Germany 28.5%

Japan 23.1%

China 6.1%


13

Investment strategy breakdown

U.S.

Again our goal is to provide sustainable cash flows to the endowment by focusing more on

passive investing with our equity. However active with our asset allocation and industry

choice. In the US we invested in ETFs in the healthcare, technology for equity. For exposure

to real estate we invested REITS. In addition, we also invested in Fixed Income ETF’s. We

expect the greenback to appreciate in the next couple of years with the current forward

guidance by the US central bank. Therefore, we invested ETF that are US dollar denominated

to get as much exposure to the dollar. We intended to eliminate the currency risks as much as

possible when investing in foreign ETFs by putting our money in currency hedged ETPs.

The US equity market have recovered dramatically since the financial crises and we believe

going forward we might experience a stock market correction with the Fed upcoming actions,

however throughout our investment horizon we believe that the US stock market will perform

very well.

We picked a few real estate ETF primarily for the purpose of diversification, yet we do

believe the sector would experience future growth given low mortgage rate, and homeowners

would be likely to finance themselves to buy houses before the Fed raises interest rates. US

housing market is booming especially in big cities like San Francisco and San Jose. Wealthy

investors from Europe, Asia and the Middle East are investing their money in US real estate

and we believe that will effect growth in the upcoming future.

We are actively pursuing the higher return, but we also consider to allocate little part of

capital to the US bond market in search for a constant and stable cash flow, supporting for the

routine expenses for Stanford activities. Thus, those ETFs characterizing secured and high

coupon payments are included in our investment basket. At the same time, the duration is set

to a range 3-5 years, which largely decrease the interest rate risks due to the expectation of

hiking rate. Meanwhile, higher US bond yield can attract foreign investors from countries

which are experiencing extremely low bond yield, especially in Eurozone and Japan. So,

increasing US bond demand would support the bond price.

Germany

Some investors believe that Germany’s stock market to be the most attractive compared to all

global financial markets. Currently, the Euro zone encounters sluggish economic growth and

The DAX as we mentioned earlier have increased by 23% despite that fact. The latest move

the ECB is perusing is strengthening the asset-buying program and as the chairman added last

meeting is that they are going to keep on aggressively stimulating the economy as long as it

needed. In addition, it’s expected that the ECB will extend the program to the March. 2017.

We observed the success of QE in the US having effect in the US economy and stock market

and we truly believe the ECB actions are signaling a huge future booming in stock market.

Therefore we invested in ETF/equity.


14

For our investment in Germany, we invested in ETFs which mimics the indexes performances

of broad German equity market including both large and small-cap companies with a focus on

technology and manufacturing. Germany is benefiting the strong export and internal economy.

Furthermore, the "Industry 4.0" high-tech strategy will yield positive return in the technology

sector in the long term. We believe the driver of this growth looking forward especially in the

tech and auto industry will be mostly influenced by the weaker euro and high demand for

cheaper exports.

We also invested in ETFs and REITs to get exposure to the real estate market in Germany

because believe investing in it now is promising. According to many researches and analysts

Germany is a mounting star in the real estate market currently competing with countries like

the UK. Wealthy investors for the past couple of years are buying real estate in cities like

Berlin and Munich due to the excellent economic performance and activity in Germany.

Below we show a time line graph of the house price index that indicates the general housing

prices in Germany from 2013 all the way to the first quarter of 2015:

The base year of the chart shown previously is 2010 where the index was 100. As seen above

there is high growth in the Germany real estate market and going forward we believe that

growth is going to stay throughout our investment horizon.

China

For our investment in China, we would like to gain exposure in two major sectors which are

Technology and Financial. China is now experiencing normal growth period, when the

economic engine is turning to the consumer-driven from investment-oriented. However, at the

same time the structure reform is being undertaken which specifically targets on the financial

industry. Regulation will be more strict meanwhile promoting financial innovation of

structured products as well as P2P lending, thus the general investment environment is more

favorable than before.

104.00

106.00

108.00

110.00

112.00

114.00

116.00

118.00

2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1

House Price Index Germany

source:eurostat.ec.europa.eu


15

Moreover, the government is urgently encouraging the E-commerce, leading enterprises such

as Alibaba has already gained its market exposure all over the world, hence Technology and

Internet sector is increasingly gaining encouraging policy support from government. In short,

we believe that tech sector has tremendous growth potential given the booming e-commerce

business activities together with government policy support.

Financial service sector has been experiencing great drop given the situation of tumbling

stock market started in late June earlier this year, thus we believe it is a good time to buy since

most of the financial assets are currently undervalued.

Japan

The investment in Japan is more diversified as we are trying to gain exposure of most sectors

through ETFs, yet we have a special focus on financial sector as well as healthcare. Japan has

just announced that their economy is entering a recession, thus it is expected to continually

stepping up the stimulus program, ramping up the equity market.

Hence we selected the ETF which is exposed to the overall Japanese equity market with

currency hedging. Japanese yen would be expected to depreciate more when liquidity is

injecting into the market. Large financial institution will be the first to benefit in terms of central

bank cash injection, and potential asset buyback programs. Healthcare is never an out-dated

topic in Japan given its aging population, the demand of healthcare service is relatively less

volatile and would in term provide stable cash flow to our investment.

Commodities Investments

We wanted to add a new asset class into our portfolio that Stanford did not have direct exposure

to in its portfolio. We wanted to invest in commodities, and it's far from gold and oil like the

usual. We want invest in Tea leaves and Coconut fruits. We will invest in an index ETF that

gives us exposure on Tea in the US. For Coconuts we might have to sign forward contracts to

invest in the commodity. We believe that these 2 commodities markets are on the verge of

impressive growth especially in the world's biggest economy the U.S. For the tea industry we

made some research and the article that best describes our motivation of investing in this

commodity is Market Realest.com commenting on growth in tea consumption:

Tea is the second most popular beverage in the world, next to water. Though the per capita

consumption of tea in the US is quite low compared to countries like the UK and China, the growth

in tea consumption in recent years has been impressive. According to the Tea Association of the USA,

the total wholesale value of tea sold in the US grew from less than $2 billion in 1990 to over $10

billion in 2014. The preference for healthier beverages is driving consumers away from soda and

boosting the demand for tea and other categories like bottled water.

We currently are invested in the SPY ETF which has 9.4% of consumer staples that gives

explicit exposure to the beverage because it includes beverages companies that sells it. Tea is

definitely a hot market and we want to take such advantage. Coconuts have the same growth

“


16

characteristics and its industry is growing in the same attitude for exactly the same reasons.

Another commodity that we believe is catching to this healthy trend is cocoa and we invested

in an ETF by Barclay goes by the ticker CHOC. People are eating more dark chocolate then

ever instead of the commercial milk chocolate. Last year there was a global cocoa fruit shortage

and we believe that will happen again because of the healthier choices people are making going

forward.

Portfolio performance & Risk statistics

Based on historical data from Dec 2013-2015

Return

Period

Port

(YTD)

Bench

(YTD)

Port (1

Year)

Bench (1

Year)

Total Return 12.38 7.94 13.17 11.32

Maximum Return 2.23 2.37 2.23 2.37

Minimum Return -3.48 -4.40 -3.48 -4.40

Mean Return (Annualized) 20.61 14.28 19.94 18.08

Mean Excess Return

(Annualized) 5.54 1.57

Risk

Period

Port

(YTD)

Bench

(YTD)

Port (1

Year)

Bench (1

Year)

Standard Deviation

(Annualized) 11.42 15.48 11.18 15.21

Downside Risk (Annualized) 8.50 11.80 8.30 11.60

Tracking Error (Annualized) 10.37 10.34

Risk/Return

Period

Port

(YTD)

Bench

(YTD)

Port (1

Year)

Bench (1

Year)

Sharpe Ratio 1.25 0.65 1.24 0.83

Information Ratio 0.38 0.11

Treynor Measure 0.26 0.26

Beta (ex-post) 0.55 0.54

Correlation 0.74 0.73

Capture Ratio 0.64 0.63


17

We backtested our portofolio to analyse its historical performance compared to the bench mark.

The statistics above that we numerated illustrates a time period that begins on Dec 2, 2013 to

Dec 2, 2015.

Looking at the first section that illustrates the portfolio’s total returns we see the YTD return

of 12.4% and the benchmark is 7.9 %. And an annual return of about 13% compared to our

benchmark of about 11%. We believe that return is mostly influenced by the stronger dollar

because as we mentioned earlier in the report most of our investments are dollar denominated

or hedged against the other currencies. Statisticians love it when we talk in their language but

thank to them they always have proved that the best measure that illustrates an expected value

of a number is its historical mean. So our simple expected return for this portfolio loosely

speaking is the average mean or total returns for both YTD and 1 year is about 20%. We also

expect that the excess return of the bench mark would be from 2% - 5 % looking forward.

Next we look at the risk stats of the portfolio for our portfolio as we mentioned earlier is to

optimize for low risk and compared to the benchmark we have a lower standard deviation.

About 11% compared to 15% that’s for both YTD and looking back for 1 year. Our Downside

Risk is annualized is 8% compared to the benchmark of 11%. We believe that the high quality

of assets that we allocated and country choice helped us reduce market exposure and exposure

to many other risk factors. Also most of our assets are ETFs which tend to be way less volatile

than other securities. Tracking error is a standard deviation measure which is represented in %

measuring how close our portfolio tracked our benchmark. Our portfolio tracking error is fairly

high around 10%. In the future we intend to lower that number going forward to better manage

our fund.

Looking at the Sharpe Ratio our portfolio beats the benchmark both for YTD and looking back

1 year. For how much risk we are taking to every unit of return we have a ratio of 1.25 compared

to the benchmark at .65 for YTD. And we have a Sharpe Ratio of 1.24 compared to the

benchmark of .83 looking back for 1 year. As we have mentioned earlier we our market

exposure is low and we will discuss the risk aspect in more details in the next section however

quantifying that risk to measure our general market exposure we had a Beta(ex-post) of .55

backward looking. We are not very confident with our correlation structure and we are currently

working more on diversification. Our correlation number is high do to most of our ETFs that

are dominated in dollars that hugely effected our correlation measure. Also most of our assets

are US based and many other international assets that we invested in are hugely effected by the

US stock market. We quantitavly broke our portfolio stats and taked about return verses risk in

the next section we breakdown the risk aspects of our portfolio with a heavy qualitative attitude.


18

Risk Analysis

Market risks

We are still concerned the instability and persistence of the US economy recovery, and the

hiking rate would hurt the vulnerable economic growth based on the external uncertainties.

Also, the monetary policy divergent between US and Eurozone would cause the more of the

capital flow into U.S, which would probably pump up the financial asset bubble and result in

systematic financial risk.

Meanwhile, the emerging market and some developed countries are struggling of the domestic

structure reform and deflation, which would press the global economy growth. With the market

full of liquidity, financial asset would be overvalued and, is possible to crash again,

contaminating the turmoil of the entire financial market.

Currency risks

Due to the portfolio composition, currency risks are built in. The most important consideration

is that we are facing the Euro depreciation risk, because we hold Germany asset denominated

in Euro Also, there is a concern of US dollar inflation, which would decrease the purchasing

power in the future.

ETF liquidity risks

We are trading the ETF products mostly in the US exchange. As an investment tool, we worry

the liquidity of the ETF when there is a panic happened or even in the normal trading session.

Geopolitical risks

Russia and Turkey are on the edge of fighting in the Mid-East area, which would compound

the geopolitical issue and cause the society turbulence. Also, the terrorist attack issue is still

closely watched. Such potential catalysts would damage the global economy development

concern.

Other risks

Volkswagen emission scandal

The car manufacturing is one major stake industry in German, Volkswagen issue is

supposed be one factor in our consideration of investing in German market.

Refugee issue

The crowding refugee flow into Germany would raise a concern of social problem.

Greece debt risk

The debt crisis is not settled down completely. We concerns that the sluggish growth in

other Eurozone countries with heavy debt would repeat in the forecastable future.


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The Risk Management Strategies

I. Due diligence: We are supposed to do prudent analysis during the all portfolio management

process. We would closely watch the risk factors including the economic environment change,

trade and investment climate, and financial considerations and so on. We are desire to keep

sensitivity to the market change.

II. Diversification & Dynamic rebalancing: Getting more asset diversification and shift the asset

allocation based on the macroeconomic condition change. Keep the dynamic adjustment of the

portfolio. Our target rebalance period would be set 6 month window. For example, if Japan is

continuing slumping during the next 6 month, we would liquidate the Japanese asset position

and go back to invest in US, especially the high-tech companies. We are supposed to increase

the US asset. Same thing as other countries investment.

III. Decrease the market risk exposure by using hedging tools, like future contract, forward

contract and option derivatives. However, such risk management tools themselves incorporate

the coherent risks, like the basis risks, credit risks and so on.

Scenario Analysis

I. When overall economy expand due to the stimulation, we would enlarge exposure to the

Germany, Japan and China to take advantage of high-growth. Also, we might increase the

commodities investment, like the oil and coal, whose price would warm up with the global

demand recovery.


US 35%

Germany 35%

Japan 15%

China 15%


Public Equity 45%

Real estate 20%

Absolute Return 10%

Commodities 20%

Fixed Income 5%


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II. When economy contracted, we will decrease the risk exposures in order to protect our

position. We will focus on the safer area like the US and Germany, while almost get rid of

investment in Japan and China because of the uncertainties. Moreover, we mainly increase the

US short-term and mid-term bonds and alternative investment like the gold. We are supposed

to lower down the real estate part.

Group Members’ Contributions:

1. Fund Introduction: Saisai Guo

2. Economic Outlook: Guiyun Zhang

3. Strategy and Allocation & Portfolio Stats: Sulaiman Butiban, Kuangda Xu, Kun Yang

4. Risk Analysis: Pei Zheng, Wanxin Zhang


US 75%

Germany 21%

Japan 2%

China 2%


Public Equity 25%

Real estate 5%

Absolute Return 10%

Commodities 0%

Fixed Income 50%

Alternatives 10%

stanford endowment fund - asset allocation

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