1. Asset Allocation & Portfolio performance
TEMPLETON GROWTH FUND
Asset Allocation & Portfolio performance
By:
Matthew Moriarty
Brian Polcar
Nick Thomas

2. Templeton Growth Fund Goal: Investing in World Markets
Long term capital appreciation by investing in global equities
Investing in World Markets
3 Principals:
Bargain Hunting
Worldwide Diversification
Long-tern Investors

3. International performance analysis (ipa)
Measure of the return on a portfolio or segment
Performance benchmark measure
MSCI World Index
Risk Analysis
Measure of Total Risk
SD of its rate of return

4. International Portfolio Management and Performance Evaluation
Optimal Portfolio?
Portfolio Composition Evaluation Factors:
Risk and Return: MSCI Indexes
RVAR
Beta
Templeton's portfolio is not optimal because it weights the investments such that those countries that have a RVOL < Ci are included in the portfolio.

5. Internationally Diversified Portfolio Construction
Countries to Invest in & Allocation Amounts:
Portfolio Statistics:
RVAR
Beta
RVOL
Country
Weight
Denmark
Turkey
Brazil
Switzerland
Russia
India
Sweden
Singapore
Japan

6. Cap and Floor Restrictions
Try to minimize effects on the asset allocation of measurement error in ex-post returns
Cap 6.0% for each foreign market & Floor 45% the U.S.
Optimally Constrained Portfolio
Optimally Constrained Portfolio Stats:
RVAR
Beta
RVOL
Country
Denmark (1)
Turkey (1)
Brazil (1)
Switzerland (3)
Russia (1)
India (1)
Sweden (2)
Singapore (3)
Japan (3)
U.S. (30)

7. Performance Comparison
Capped portfolio has a lower RVAR attributed to the increase in standard deviation due to inclusion of the domestic market.
Suggesting the return will have a higher probability of deviating from the expected value
Systematic risk is different due to the RVOL for the capped portfolio being lower.
RVOL deviation due to the change in weighted beta value which increases slightly for capped portfolio
Invest where RVOL > Ci
Optimal Portfolio
Capped Portfolio
MSCI World
MSCI USA
Templeton
RVOL
RVAR β

8. Out-of-Sample Performance Comparison
Due to poor market performance in 2016, portfolios did not do as well as in the past.
RVOL & RVAR of capped portfolio outperformed the optimal portfolio because returns in the optimal portfolio had a larger weight in markets affected.
Optimal Portfolio
Capped Portfolio
RVOL
RVAR β