Investment Policy Statement
The report will cover an investment policy statement for Tony Stark. Tony Stark is a billionaire inventor and entrepreneur who created Stark Industries, a multinational technology company for which one aspect is alternative energy sources. It is important to note that recently this year the company, Stark Industries, used to have a weapons division which was terminated due to personal reasons. This will influence the composition of the portfolio that will be suitable for this client because it shows the client is wiling to make spontaneous decisions when personal beliefs and/or circumstances change. He is 38 years old and hopes to retire at the age of 60, however he enjoys the technology industry and will likely continue to work in a small capacity into retirement. Due to the inability to predict how involved he will be and the exact income that he will take from this after retirement, potential income after retirement will be ignored. Tony Stark is a highly confident, and intellectual individual who tends to make significant decisions spontaneously based off instinct, which reflects a strong, risk-taking personality. He also tends to spend spontaneously as well, which is especially true when it involves something that he is passionate about.
He is not currently married; however, he believes that could happen in the future, and he has no intention of ever having children. If he remains unmarried, his estate will be donated to a foundation that will be put in place to spread alternative energy worldwide, making this energy available to those who would not normally have access, as well as making energy production more efficient.
The report will also cover a strategic asset allocation most suitable for this client, as well as performance measurement and attribution of this asset class. Finally, an overall risk analysis will be completed for within the portfolio itself as well as in comparison to a suitable benchmark. Overall, the purpose of the report is to provide an investment option most suitable for the client, Tony Stark.
I.Investment policy statement
Mr. Tony Stark is expecting to retire at the age of 60. His health is difficult to fully measure. He currently has a non-genetic heart condition that has stabilized due to recent advancements in technology, with all other aspects of his health being strong. His relatives have lived to an average age of 90, and he has strong confidence in the technology to support his needs and therefore would like to plan to 90 years of age. He currently takes home a salary of $1,500,000 annually, net of taxes. Over the years he has put aside $12 million dollars which is currently investable and has an additional $10 million in company shares. Tony stated that he has a separate account an emergency savings account that is highly liquid, that is not investable and covers expenses for a year. He states that this income covers all annual expenses, as well as leaves enough funds available annually for special projects that he deems worthy, liquidity is required because he spontaneously makes decisions regarding these special projects. He would like this full amount to be available throughout retirement as well as to not have to make any changes to his lifestyle. Using 3.0% inflation, we determine that the client will require a present value of $33,197,755 just prior to retirement. To reach this goal, he requires an annual rate of return of 2.84%. The present value of the required return does not take into consideration the $10 million in company shares because that is not investable but will be available in retirement. Calculations assume no further contributions to investments with PV of retirement needs in BGN mode.