Cases For Publication (UCWC103)
Abstract

CHALLENGES OF PORTFOLIO RETURN AND RISK OPTIMISATION

Ravindran Ramasamy
Shanmugam Munusamy
Mohd. Hanif Mohd. Helmi

Funds allocation for unit trust companies was a challenging problem because it had to satisfy several conditions and constraints imposed by regulatory authorities such as the Securities Commission. The motives for these regulations were to ensure the safety of these funds, liquidity of investments, to reduce any risk, etc. The Government also imposed certain conditions to fulfill national priorities, such as the promotion of Islamic investments. While fulfilling the above constraints, fund managers should not lose sight of maximizing returns, which was the core objective of any investment. To allocate funds among the investments, managers applied Linear Programming (LP) models. Calculations involving these models were very tedious before the use of computers. However, interpretation of the results still posed a challenging task.