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Shad Reed is on the Board of Trustees for the Wesley Ridge World Hunger Organization. The primary role of the organization is to oversee a large endowment fund that was originally established in 1995 as the Wesley Ridge U.S. Hunger Fund to provide food to low income children in the United States. Recently, the original donor for the endowment has died and provided the fund another $200 million in his will and broadened the scope of the fund to provide food for hungry children all over the world. With the new addition, the endowment’s assets are currently valued at $600 million. When the fund was originally established, the spending rate was 5%; however, with the broader scope, the payout has increased to 6%. Also, since funds are going to be distributed to other countries, the board has determined that approximately 25% of the foundation’s annual payout will be in the foreign currencies of other countries. The fund’s investment policy statement which has been revised by the board is shown below:
The board has consulted with an investment advisor to discuss changes to the endowment’s current asset allocation which is shown below: Which of the following sets of recommendations would be most appropriate for the endowment fund? A. Increase the allocation to cash, decrease the allocation to U.S. equities, decrease the allocation to international equities, and increase the allocation to venture capital. B. Increase the allocation to foreign government bonds, increase the allocation to international equities, keep the allocation to cash the same, and keep the allocation to venture capital the same. C. Decrease the allocation to U.S. Equities, decrease the allocation to international equities, increase the allocation to foreign government bonds, and increase the allocation to intermediate-term U.S. Treasury bonds. |