INTEPRETATION EXERCISE

1. TOTAL RETURN

Figure 2.8, presents the investment performance of the total return from April
2000 to July 2014. The highest peak performance was 15.3% occurred in July 2009.
However, in October 2008, the grawh show a drasticly dropped to(-25.85477%). This
situation is due to the global financial crisis that hit the global economic market.

As a conclusion, it is said that the total return fluctuated considerably as a result

of financial crisis alongside with the other factors such as supply and demand and the
other related domestics issues.
2. RISK RETURN RATIO

Figure 2.9 shows the interaction between risk-return profile for all investment
portfolios. Among all the asset classes that have been analysed, share become the primary
investment being chosen. Besides, over the period of January 2000 until December 2014,
Bonds portfolio exhibited low-risk and low total return patterns. The performance of the
asset class of property can be considered as the lowest return driver/investment
instrument in the term of revenue collection or the gain of dividend. This is caused by the
uncertainties in the property market at that particular period of time. This has result that
the return of property portfolio to be low, yet it possessed the high risk due to the
uncertainties in the market.
3.SHARPE RATIO

These findings confirm the investments rule of thumb in which stated that the
higher the return, the higher the risk associated with the investment. This proof that can
be seen from the projection of the annual risk for each of the asset classes being analysed,
in which the property scored 15.95%, and Bonds = 3.22%

However the outlier of the comparison of annual return and risk in the Shares
portfolio doesnt comprehend to the nature of the rule. This is caused by the uncertainties
in the Shares Market that has affected the return of the Shares investment to be low, yet it
possessed a high risk in the investment.

From the risk point of view, Shares have among the highest risk level compared to
other domestic portfolios with the projection of annual risk of 12.72. property were the
first with the score of 15.95, and Bonds portfolio showed an intermediate class of risk
with the projection of 3.22

3. CORRELATION
 .

To examine the diversification benefits across the assets and the markets, inter-
correlation matrices between major asset classes from January 2000 to December 2014,
were assessed as tabulated in Table 1.2 above. The most of the assets were significantly
non-correlated with each other.

These assets showed less potential of diversification over this period. While there
are also assets that slowly correlated with each other which are LPCs with Shares (r =
-0.04), That means any changes in the field of Bonds will change with other asset.

In overall, the correlation analysis of asset classes has proven that there are
potential benefits to be gained from the portfolio diversification. The investment made
onto the independent asset classes is pro-founded to able to gain a better return compared
to the dependent ones.The investors can achieved better return with the less dependency
imposed onto the types of the portfolio being invested and the other asset classes.

4. EFFICIENT FRONTIER
 Efficient frontier contains a combination of assets. The purpose is to examine
different efficient asset allocations by using several risky assets. The analysis will
generate a better understanding in terms of risk profile with a combination of several
assets. The key determinant of portfolio risk is the extent to which the returns of the
assets tend to vary rather than in tandem or in opposition. Furthermore, the degree to
which all asset classes risk-reduced variance of returns depends on the degree of
correlation between the returns of the securities.

n this research three asset classes, including listed property companies, were
tested versus two asset classes in which listed property companies were excluded. The
efficient frontier analysis shows the optimal level to be achieved from the various
portfolio combinations (three portfolios), relative to the given level of risk exposure. The
optimization software provides the asset weights for a range of efficient portfolio
combinations of the lowest return and risk to the highest return. The minimum and
maximum returns on the efficient frontier were calculated.

6.ASSET ALLOCATION
 The findings suggest the mixed-asset classes market has a narrow return spread
from 3.65% to 4.19% with 2 points of optimal investment. This suggests that the highest
portfolio risk (32.03%) and the equivalent annual target return (4.19%) consist of 100%
of shares. And for the minimum risk (29.72%) with equivalent annual target return of
3.65%, it suggests that the largest proportion for asset classes is 87.08% shares.

The proportion of bond and LPCs is 0% in to the high risk that means, that sector
contributions play no part in the efficient set. This proportion has been suggested as a
viable level for this asset. The largest proportion being invested in shares may be due to
the fact that shares sector has the highest Sharpe ratio.

In summary, the inclusion of shares in the asset allocation has the highest and
biggest contribution towards the overall asset classes performances. It can be seen from
the proof that the shares contributed the highest return of 4.19%, and also with the
highest risk rate among all (32.30%).