Reference no: EM133057739

Question - You asked to provide advice to a local university that is choosing to allocate 10 million dollars in funds for a new endowment. The objective of the endowment is to fund a new research lab conducting cutting edge research in nanotechnology. The research field is quite dependent on equipment and the lab expects to spend between 500,000 and one million dollars each year on equipment. Occasionally there will be unexpected surprise one-off outlays in excess of this. The expenses are expected to increase roughly in proportion to the rate of inflation. The fund doesn't have an end date in mind. Capital preservation is very important to the fund as does meeting the regular costs. The university is a tax-exempt institution. What factors do you identify as being important in determining the optimal portfolio they should hold? What mix of stocks, bonds, and cash would you recommend? Fully justify your answer.