Portfolio Management Quiz 4

1 Match the reasons for holding each asset class

Equities	Fixed interest	Property	Alternative assets
				increased demand for capital
				differentation between competing superannuation funds
				perceived social benefits
				returns in the form of income and capital growth
				improved expertise of specialist managers of alternative asset classes
				a low-risk means of funding longer-term liabilities
				a hedge against inflation
				more investors with long-term horizons
				returns superior to those obtainable from short-term money markets
				reduce variance of portfolio returns
				diversification
				additional returns
				normally liquid and divisible

2 Match the risk with the asset class

Equities	Fixed interest	Property
			relatively illiquid in the short term
			convexity risk
			duration risk
			comparatively high transaction costs
			inflation risk
			indivisible
			income uncertainty
			insolvency risk
			economic risk
			price volatility
			very management intensive

3 There are two distinct sectors in the Australian equities market:

(financials and non-financials)

4

Equities can reduce of portfolio returns because their with other asset classes, for example, property, is low.

5 The main types of fixed interest securities both domestically and internationally are:

(government or semi-government)

(debentures and notes)

including mortgage-backed paper

bonds

6 Three main categories of direct property investment are:

/office

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