The Harvard Management Company and Inflation Protected Bonds Executive Summary The Harvard Management Company (HMC) was established in 1974 with the goals providing world-class investment management focused solely on generating strong results to support the educational and research objectives of Harvard University. The company’s goals are to correctly measure Harvard University’s financial requirements and to provide investment opportunities that will accurately meet or exceed them with the
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The Harvard Management Company and Inflation-Protected Bonds 1(a) Regular Treasury bonds are purchased at face value in the beginning or an adjusted price prior maturity. And in every period‚ normally annul or semiannual‚ investor will receive a coupon as an interest and at the maturity a principal plus coupon. (b) Coupon and principal of the Regular Treasury bonds are fixed‚ therefore if the inflation rate increases in the forecasting future‚ investor will receive the same amount of coupon
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The Harvard Management Company and Inflation Protected Bonds The Harvard Management Company is an entity wholly owned by Harvard University and it is responsible for managing Harvard’s endowment and pension assets. At the end of the second quarter of 2000‚ Harvard Management Co. oversaw the management of $19 billion‚ the majority of it managed internally by Harvard’s investment professionals. The endowment’s goal is to provide a real return of 6%-7%‚ of which 4%-5% would be distributed annually
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includes- shares‚ debentures‚ bonds etc. A key division within the capital markets is between the primary markets and secondary markets. In primary markets‚ new stock or bond issues are sold to investors‚ often via a mechanism known as underwriting. The main entities seeking to raise long-term funds on the primary capital markets are governments (which may be municipal‚ local or national) and business enterprises (companies). Governments tend to issue only bonds‚ whereas companies often issue
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1. What is the size of HMC’s portfolio? How is the portfolio managed and what are the management costs? What is the role of the Policy Portfolio? The size of HMC’s portfolio 2. Why is HMC focusing on real returns? 3. HMC’s estimates of expected returns‚ standard deviations and correlations di_er from the twenty-year historical estimates. Why might this be? Comment on the di_er- ence between the two sets of estimates‚ focusing on expected returns and standard deviations. 4. Let’s assume
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COMPANY AND INFLATION PROTECTED BONDS Be Sure to Include the Following in Your Analysis: 1. How do regular (nominal) Treasury bonds work? How does inflation impact the coupons and principal of a regular T-Bond? How are TIPS different from regular Treasury bonds? When do TIPS outperform/underperform regular Treasuries? 2. What effect do you think an increase in real interest rates has on the price of TIPS? And an increase in realized inflation? An increase in expected inflation? An increase
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[pic] Extending this theory to the HMC case‚ it appears that TIPS has been considered as a risk free security by HMC and added to the efficiency frontier (which was obtained as a result of the various portfolio simulations using mean variance analysis). This completed the Capital Market line and enabled HMC to come up with recommendations for the most efficient portfolio given the available asset classes. We would agree with this allocation by HMC to TIPS in order to introduce an element
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Business and strategy Hampton Machine Tool Company (HMTC) is established in 1915‚ specialized in manufacturing tools for the automobile and the aircraft manufacturer. HMTC business has been extremely successful in the mid and late 60s. But in the mid-1970s‚ HTMC’s business had been considerably affected by the Arab oil embargo and ending of Vietnam War‚ which had turn down the automobile and aircraft industry. However‚ HMTC has survived through this hard time and its market share increased due
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L.S.E. Dept. of Finance FM423-Michaelmas Term 2010 Questions for the HMC case study 1. What is the size of HMC’s portfolio? How is the portfolio managed and what are the management costs? What is the role of the Policy Portfolio? 2. Why is HMC focusing on real returns? 3. HMC’s estimates of expected returns‚ standard deviations and correlations differ from the twenty-year historical estimates. Why might this be? Comment on the difference between the two sets of estimates‚ focusing especially
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Are We Really Being Protected By The Police In Our Communities? A middle age man rides through his city of Los Angeles intoxicated. Who would have ever thought he’ll get pulled over before making it home? King did not expect for his night to become a disaster after having a wonderful time out with friends. Although driving under the influence in any state is illegal; what made this particular case make the front page of multiple news articles? King led officers on a high- speed chase endangering
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