carve out - strategic alloc only, 303, strategic, beginning, period

NakedPuts

How would you allocate cash if your beginning of period weight exceeded your strategic target? The cfai text only handles the reverse. See cfai volume 6 page 303.

Thanks

Iginla2011

could you elaborate? thnx.

mik82

From CFAI text (Vol 6 page 364):

"under the strategic allocation method, the cash position associated with equity is assumed to be total assets multiplied by the percentage difference between the strategic and actual allocation"

All the examples given in the text and in EOC questions the actual allocation is LESS than the strategic allocation. But it just as soon could be the other way around. That would infer you would have to subtract the cash return from the carve out performance in the even the actual allocation exceeds the strategic allocation. So you would be penalizing them. Just doesn't seem intuitive.

Also see page Vol 6 302-304 for more discussion on the topic.



Edited 1 time(s). Last edit at Thursday, June 3, 2010 at 01:35PM by naples111.