Target Asset Allocation
The long-term desired allocation across asset classes that the investment committee has determined best achieves the institution's objectives — return targets, risk tolerance, liability profile, and liquidity needs.
Set by the investment committee or board based on asset liability modeling, the target allocation serves as the strategic blueprint of the portfolio and the anchor against which reported allocation is compared.
Example target allocation for a large university endowment: Global Equity 25-30%, Private Equity / Innovation 20-25%, Hedge Funds / Absolute Return 15-20%, Real Assets 10-15%, Fixed Income 5-10%, Risk Mitigation 5-10%, Cash 1-3%.
Frequently Asked Questions
What is target asset allocation?
Target asset allocation is the long-term desired mix of asset classes — equities, fixed income, alternatives, real assets — determined by the investment committee based on return targets, risk tolerance, and liability profile.
How is target allocation determined?
Target allocation is set through asset liability modeling, which analyzes the institution's return requirements, risk tolerance, liability profile, and liquidity needs to determine the optimal mix of asset classes.
What does a typical endowment target allocation look like?
A large endowment might target: 25-30% global equity, 20-25% private equity/innovation, 15-20% hedge funds, 10-15% real assets, 5-10% fixed income, 5-10% risk mitigation, and 1-3% cash.
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