The Study On The Asset Allocation Of Security Investment Fund And Performance

The asset allocation of security investment fund is the process that the fund managers decide on how to allocate fund among various asset class. Foreign experts made such conclusion that asset allocation plays a critical important role to the fund performance. Our security investment fund did not pay more attention to asset allocation until 2003. Our open-end funds have often been subjected to the storm of redemption, it is very urgent and important to control liquidity risk through asset allocation. The most important, there is a great disagreement among our funds that the source of fund performance is security selection or timing, that is to say, whether it is necessary to carry out asset allocation. Therefore this article focus on the study about asset allocation of security investment fund, which is helpful for funds to realize the importance of asset allocation to performance, which is helpful for funds to adopt various asset allocation strategies in order to control risk and improve performance.This article is based on the combination of theoretical study and empirical study, the synthesis of qualitative analysis and quantitative analysis. The author refers to a great deal of literature about asset allocation theory and strategy, and put them into practice in our fund market. The main innovations are listed as follows: first of all, the study on how to get solution and establish the optimal cash-allocation proportion and the optimal asset allocation proportion in order to control liquidity risk. Secondly, the positive study on the dynamic asset allocation strategy to our fund. Third ,the study on the importance of asset allocation to fund performance on the basis of time series, sectional series and panel data.A brief introduction of the main asset allocation strategies of security investment fund, including strategic and tactical asset allocation, insurance asset allocation, dynamic and static asset allocation, investment style asset allocation, economy cycle asset allocation et al. Our open-end funds can take advantage of cash to deal with small redemption shock on the basis of the random management model about optimal cash allocation. On the other hand, Our open-end funds also can make use of well liquid bonds and stocks to deal with great redemption shock on the basis of the most optimal asset allocation proportion between risky asset and risk-free asset according to mutual fund investor structure, the proportion invested in the risk-free asset is equal to the expected non-withdraw proportion of investor with less-liquidity demand.The most feature of fixed-income security asset allocation lies on its stable cash flow. The bond asset allocation complies with the principle from total asset allocation to asset class allocation, then to bond selection. We can make use of various bond asset allocation to risk-free arbitration. In terms of conservative investor, the risk-free asset is inflation-indexed bond instead of cash or long-term minimal bond.The insurance asset allocation is classified into two kind of types, one is the option-based portfolio insurance asset allocation, including protective put, protective call, collar option and synthetic put option, the other is the dynamic insurance asset allocation, including buy and holding, constant mix, constant proportion portfolio insurance, time-invariance portfolio protection, stop-loss, modified stop-loss and constant proportion portfolio insurance for fixed-income investment.This article focus on empirical study about three kinds of dynamic insurance asset allocation with market move method, and conclude that TIPP is dominant to CPPI and CM, TIPP(2,90%) is the most optimal strategy to guarantee portfolio safety and growth according to performance, yield rate distribution, upside capture, sortino and information ratio. It provides the foundation of financial innovation on the new safety product for our security investment fund and insurance company.The study on the performance of asset allocation refers to the explanation degree of asset allocation to performance. We use fund-data to make empirical study based on the literature of foreign fund performance analysis methods and make conclusion as following, (1) policy asset allocation can explain about 80 percent of the variability in returns of a typical funds across time, which shows that asset allocation is more important than active management. (2) Policy asset allocation can explain about 17 percent of the variation of returns among close-end funds and only 2.85 percent among open-end funds respectively, which is inferior to American mutual fund and pension fund. Therefore, the variation of returns among funds is attribute to their security selection instead of the variation of their policy asset allocation.