1) Build a model to simulate the solvency of a pension fund from 2016-2040, accounting for annual deductions from the fund and contributions to the fund.
2) Analyze the historical risks and rewards of different asset classes from 1997-2016 using standard deviation and average returns. Treasury bills had the lowest risk and reward while private equity had the highest.
3) Different asset class allocations would impact the probability of fund survival based on the simulation, though past performance may not indicate future performance due to changing economic conditions.
1) Build a model to simulate the solvency of a pension fund from 2016-2040, accounting for annual deductions from the fund and contributions to the fund.
2) Analyze the historical risks and rewards of different asset classes from 1997-2016 using standard deviation and average returns. Treasury bills had the lowest risk and reward while private equity had the highest.
3) Different asset class allocations would impact the probability of fund survival based on the simulation, though past performance may not indicate future performance due to changing economic conditions.
1) Build a model to simulate the solvency of a pension fund from 2016-2040, accounting for annual deductions from the fund and contributions to the fund.
2) Analyze the historical risks and rewards of different asset classes from 1997-2016 using standard deviation and average returns. Treasury bills had the lowest risk and reward while private equity had the highest.
3) Different asset class allocations would impact the probability of fund survival based on the simulation, though past performance may not indicate future performance due to changing economic conditions.
1) Build a model to simulate the solvency of a pension fund from 2016-2040, accounting for annual deductions from the fund and contributions to the fund.
2) Analyze the historical risks and rewards of different asset classes from 1997-2016 using standard deviation and average returns. Treasury bills had the lowest risk and reward while private equity had the highest.
3) Different asset class allocations would impact the probability of fund survival based on the simulation, though past performance may not indicate future performance due to changing economic conditions.
1. Build a model to simulate the solvency of the pension fund through 2040. Use the market value of the fund at the end of 2016 as the starting point for your simulation. Next, simulate the market value of the fund through the end of 2017. To do so, you will need to account for:
roi_mean Probability_of_Insolvency 0 0.05 0.9696 1 0.056364 0.9528 2 0.062727 0.9337 3 0.069091 0.9089 4 0.075455 0.8748 5 0.081818 0.8356 6 0.088182 0.7924 7 0.094545 0.7348 8 0.100909 0.6716 9 0.107273 0.6058 10 0.113636 0.5333 11 0.12 0.4624 2. Historically, what have been the risks and rewards of the asset classes that Hackett can invest in? Use standard deviation to measure of risk and average return to measure reward. We use the data from 1997 to 2016.
Treasury Treasury Corporate Common Hedge Private
Bills Bonds Bonds Stocks Funds Equity
Avarage 2.15% 7.82% 7.53% 9.38% 9.17% 14.29%
Return
Risk 2.19% 12.19% 7.18% 18.50% 11.71% 15.23%
3. Assume that historical performance is a good indication of future performance. Based on
your simulation, how does investment into each asset class impact the probability of fund survival?
4. Is it reasonable to assume that past performance is a good indication of future
performance? Why or why not?
不合理。因為未來的表現亦須考量相關的總經因素如貨幣、利率政策，以及不同
市場在每個時間點對於投資人的吸引程度。此外，新的監管制度及規範可能也會
影響標的資產的報酬。基於這些情況，過去的表現並未是未來表現的良好指標。
5. What should Hackett do with the portfolio? Are there other options that Cook County should explore?
