PTC’s Investment Committee intends to adopt a set of long-term asset allocation ranges for the…

PTC’s Investment Committee intends to adopt a set of long-term asset allocation ranges for the firm’s defined benefit pension plan that takes into consideration the plan’s liability structure as set forth in the introduction. In addition, the committee requires a set of short-term asset allocation targets that will position the fund’s current exposure within the long-term setting. As a principal of BAG, this strategic and tactical goal-setting assignment has been given to you. You intend to preface your recommendations to the committee with a brief review of three alternative methods that may be used for determining appropriate asset allocations, including: Extrapolation and adjustment of long-term historical asset class data. Multiple-scenario forecasting. Asset/liability forecasting.

a. Briefly describe the three alternatives listed above. In your discussion, cite one strength and one weakness of each method relative to the purpose of determining long-term pension portfolio asset allocation ranges.

b. Based on the information provided in the introduction and Figure 26A, and your general knowledge of asset class characteristics, create a set of long-term asset allocation ranges for the PTC pension portfolio using the format presented below, and justify your range selection for each asset class.