Harvard Management Company Investment Analysis

Case Study 2 The Harvard Management Company and Inflation Linked Bonds (2001)

HMC's Mission Statement ,[object Object],Case Study 2: The Harvard Management Company and Inflation Linked Bonds (2001)

HMC Background ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Case Study 2: The Harvard Management Company and Inflation Linked Bonds (2001)

Policy Portfolio (goals) ,[object Object],[object Object],[object Object],Case Study 2: The Harvard Management Company and Inflation Linked Bonds (2001)

Policy Portfolio (components) ,[object Object],Case Study 2: The Harvard Management Company and Inflation Linked Bonds (2001) Type of Asset Policy Domestic Equity 32 Foreign Equity 15 Emerging Markets 9 Private Equity 15 Absolute Return 4 High Yield 2 Commodities 5 Real Estate 7 Domestic Bonds 11 Foreign Bonds 5 Cash -5

Policy portfolio (analysis) ,[object Object],[object Object],[object Object],Case Study 2: The Harvard Management Company and Inflation Linked Bonds (2001)

TIPS performance ,[object Object],[object Object],[object Object],[object Object],[object Object],Case Study 2: The Harvard Management Company and Inflation Linked Bonds (2001)

HMC’s final Recommendations ,[object Object],[object Object],[object Object],Case Study 2: The Harvard Management Company and Inflation Linked Bonds (2001)

Recommended Policy Portfolio Case Study 2: The Harvard Management Company and Inflation Linked Bonds (2001) Type of Asset Old Policy Portfolio New Policy Portfolio Domestic Equity 32 22 Foreign Equity 15 15 Emerging Markets 9 9 Private Euqity 15 15 Absolute Return 4 5 High Yield 2 3 Commodities 5 6 Real Estate 7 7 Domestic Bonds 11 7 Foreign Bonds 5 4 Inflation-Indexed 0 7 Cash -5 0

What are TIPS? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Case Study 2: The Harvard Management Company and Inflation Linked Bonds (2001)

What are Inflation Linked Bonds? ,[object Object],[object Object],[object Object],[object Object],[object Object],Case Study 2: The Harvard Management Company and Inflation Linked Bonds (2001)

Associated Risks ,[object Object],Case Study 2: The Harvard Management Company and Inflation Linked Bonds (2001) ,[object Object],[object Object],[object Object],[object Object]

How do TIPS work? ,[object Object],Case Study 2: The Harvard Management Company and Inflation Linked Bonds (2001) ,[object Object],[object Object],[object Object],[object Object],[object Object]

How do TIPS work? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Case Study 2: The Harvard Management Company and Inflation Linked Bonds (2001)

How do TIPS work? - Principal ,[object Object],Case Study 2: The Harvard Management Company and Inflation Linked Bonds (2001)

How do TIPS work? - Coupon Payment ,[object Object],Case Study 2: The Harvard Management Company and Inflation Linked Bonds (2001)

When would TIPS OUTperform/ UNDERperform regular Treasuries?

what is a regular US treasury security? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Regular Treasuries vs. TIPS ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

SO..What happens to TIPS if deflation occurs? ,[object Object],[object Object],[object Object]

There are 4 criteria for determining an asset class: ,[object Object],[object Object],[object Object],[object Object]

Correlation between TIPS and the other securities in the portfolio

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Asset class effect on Sharpe ratio

New portfolio ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Harvard Management Company Investment Analysis

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