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Question 1

Mr. Richard Li, 45 years old, is a technopreneur who recently moved to Singapore. A private equity fund paid him SGD 180 million for a 90 percent stake in his chip design firm. He has agreed to remain an advisor with the firm and not sell his remaining stake valued as S$ 20 million for five (5) years after the acquisition. He does not have any other assets beyond this as all his resources had been invested into his business which has now been sold.

Upon arrival in Singapore, he bought a good class bungalow for SGD 50 million to live in an and has set aside SGD 50 million to start a tech incubator for new startups. He does not expect income from this investment.

His remaining assets are currently invested in USD bank deposits while he
contemplates the appropriate longer-term asset allocation.

Mr. Li is married with one daughter aged 17. He would like to send her to a prestigious overseas university for her undergraduate education and expects that to cost S$1 million in present value terms. He would also like give her S$1 million per annum after her graduation (estimated in 5 years) for the next 10 years i.e. from ages 22 to 32.

Mr. Li is keen to plan his retirement in about ten years later. He estimates his annual expenses at S$1 million per annum for the next 20 years.

For the balance of his assets (“Non-Lifestyle Portfolio”), he would like to allocate them into the following three buckets:

1. Bucket to cover replenishment of lifestyle bucket to cover age 65 and beyond. This bucket should be invested with a capital preservation focus.

2. Bucket to be able to take advantage of opportunistic investment coming from his circle of friends and business contacts as well as you.

3. Bucket to be able to meet the needs of future generation and the eventual creation of a philanthropic structure. This bucket should be invested with a growth focus. Being a fintech entrepreneur, he feels that he understands private equity and is interested in having a meaningful allocation to private equity within this bucket.

He has reached out to your firm to help him to think about how to allocate his family wealth using a Goal-Based Wealth Management Approach. Develop a Family Goals Analysis for Richard. Please explain your steps clearly

Question 2

Develop a Policy Portfolio/Strategic Asset Allocation for the Non-Lifestyle Portfolio ONLY (not the entire family asset). Please use the assets, expected returns, risk and correlations in the appendix. You should develop an allocation for each of the three (3) buckets. Discuss in detail the recommended asset classes and their weights in each of the three (3) buckets and the overall Non-Lifestyle Portfolio in aggregate.

For the overall Non-Lifestyle Portfolio, explain and discuss any assumptions made and constraints you have imposed on the asset allocation during the optimisation stage.

Evaluate the appropriateness of Richard’s intended allocation to private equity

Question 3

Create an Implementation/Live Portfolio for the Non-lifestyle Portfolio – Using any fund distribution website, for example Fundsupermarket, identify suitable implementation funds for this asset allocation. Please justify your choices with the appropriate analysis

You recall that Mr. Li has also indicated an interest in looking at sustainable investing. How would you advice him to implement this. Looking at the performance of listed securities with the sustainability theme, would you advice him to implement it through listed securities ? How else can he do this?

Question 4

Evaluate the risk of the Non-Lifestyle Portfolio using the appropriate Risk Measures and recommend an appropriate risk management plan for this portfolio

Question 5

You had a conversation with your firm’s investment strategist and he presents to you the following outlook for the coming quarter.

“After chugging along in a “Goldilocks” zone through most of the year, markets have been hit with a bout of volatility in the past few weeks and this is a quick summary of our status and thoughts.

We think the main triggers for the recent downturn is a combination of:

BOJ change in policy that undermine Yen carry trades and triggers a reversal
in many popular trades that had been working in 2024. This will lead to
increased volatility
 Equity markets appeared to be getting ahead of the economic fundamentals
A growth scare in the latest US jobs report increases the risk and quantum of a
cut in interest rates by the US Federal Reserve
Middle East risks rising which would impact risk assets; and
Volatility hitting threshold levels for many systematic (CTA) traders to reverse
positions

Overall, we think markets are dealing with more technical issues than fundamental issues and thus we think the coming weeks can be challenging but we still think the 6mth to 12mth outlook is still healthy. Conservative portfolios should take the necessary precautions.”

What tactical asset allocation moves would you recommend for the Non-Lifestyle Portfolio.

Question 6

As a technopreneur, Richard is a keen follower of developments in digital currency and is keen to include it in his portfolio. Please analyse this asset class from an asset allocation perspective and advise him accordingly.

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