Research On The Contribution Of Asset Allocation Strategy On China’s Open-end Fund

Asset allocation refers to the investment fund distribution among different asset classes in accordance with certain investment demand. Generally speaking, in order to achieve the relative maximization of return on investment, it means allotting funds into various assets in a reasonable proportion based on comprehensive considering the risk and return of each asset. Asset allocation is one of the important component parts of modern portfolio theory, and has a decisive impact on the actual investment performance. Therefore, it is the major consideration in the decision-making of institutional investors. The asset allocation of security investment fund is the process how the fund managers decide to allocate fund among various asset classes, and how to dynamically adjust the proportion of each basic investing asset according to short market opportunity. In our country, the security investment fund started very late, and has a short development period. At the same time, the degree of attention on the asset allocation strategy is still relatively low among the funds’investment decision. Meanwhile, the understanding of the asset allocation strategy is not sufficient enough. For making the security investment fund sophisticated in China, this paper will present the international and popular asset allocation strategy through empirical analysis, then point out the meaning of asset allocation strategy.This paper will describe asset allocation theory including Markowitz Mean-variance Model, Harlow Model and VaR Model, then explain in which condition these models can be used. Based on the basic above theories, the author will divide the asset allocation strategies into two types, and they are Strategic asset allocation and Tactic asset allocation. Furthermore, I will also analyze the influencing factors of asset allocation strategy in the security investment fund and the current development situation of our funds. By using empirical analysis method, I will use time series revenue data and cross section data to argue the contribution degree among Strategic asset allocation factor and Tactical asset allocation factor including Market Timing and Security Selection. Besides, this paper selects40China’s open-end funds as our study sample, and empirically and quantitatively analyzes what degree the asset allocation strategy can explain on the difference of funds’income. Besides, on the condition of considering the investing risk, this paper will point out what degree can asset allocation strategy explain on different funds’income. After the empirical analysis, we get a conclusion that the strategic asset allocation can contribute to explain83.53%of the fund’s income along with time goes on, the tactic asset allocation can explain1.26%of the income changes. By introducing down-side risk, this paper creates an indicator to comprehensively estimate funds’performance. Under this condition, the strategic asset allocation strategy and timing factor can contribute40.57%of the income difference in this research.Choosing the security investment fund as our research target, this paper focuses on the important role that the security investment fund plays and its broad developmental prospects. At the same time, we also see the wide application of asset allocation strategy in the fund. Through empirical analysis on the security investment fund in China, this paper will show the trend of its asset allocation, and will also make some targeted recommendations combined with China’s security investment fund’s characteristics and development prospects. After finishing this paper, I hope it can helps in guiding the development of our security investment fund.The innovations of this paper mainly contain research methods and the operational skills. As refer to research method, the author creates a comprehensive indicator to measure funds’performance. There are also innovations on choosing variables, such as stock index and bond index. Also, the author adds monetary asset to the fund’s asset portfolio, because nearly all funds invest on monetary asset, which is more in line with reality. All the innovations above reflect that the author wants to make the research exact and reliable.The structure of this paper is divided into five parts:Part1Introduction, Including the background, literature review and the main study point description of this paper. Part2Introducing the basic theoretical content of the asset allocation. Part3describing the meaning of asset allocation in our security investment fund and the influencing factors. Part4presenting asset allocation strategy and the empirical analysis on China’s security investment fund. Part5Conclusion, including the innovative points and inadequacy points of this study, and point out the future development trend of the security investment funds’asset allocation.