Abstract :

XYZ institution is a Public Service Agency in Educational Sector, focused on giving the scholarship in master and doctoral programs level domestically and abroad, also in many affiliated researchers funding programs. The effect of granting scholarships and research funding produces an extraordinary output for the country. It was successfully increased the quality level of education in Indonesian society, also with the Indonesian Human Development Index. With a great accumulated amount of asset under management in fiscal year 2023, XYZ institution have a really big opportunity to maximize the investment return and give all Indonesia’s citizens an equal chance of pursuing the higher education.

Markowitz Modern Portfolio Theory (MPT) is utilized to construct an optimal stocks portfolio for XYZ institution. The proposed stocks portfolio seeks to find a combination between high-growth stocks that have the potential to increase in value and stable dividend-paying stocks that provide income stability. The goal is to maximize the overall investment portfolio returns while taking its risk tolerance and investing objectives into consideration. Diversification was done by investing in a diverse range of companies across sectors and asset classes, reducing exposure to single asset risk. The proposed optimum investment portfolio provides XYZ institution a diversified allocation of assets, consisting of a portion in Time Deposits at 36,68%, Government Bonds at 34,10%, Corporate Bonds at 27,21%, and Stocks at 2%, which is constructed in a form of Aggressive Strategy, Moderate Strategy, and Defensive Strategy. The stocks selection resulting the best five stocks composition in Moderate Strategy which consist of BBNI at 20,17%, BJBR at 19,54%, PTBA at 20,15%, ADRO at 19,67%, and INDF at 20,47%, projected could give a return contribution at 6,60% with the lowest given risk of 26,83% from the stocks portfolio and could generate a 7,15% to the overall investment portfolio return.

---

Keywords :

Educational Endowment Fund, Markowitz Modern Portfolio Theory, Optimum Investment Portfolio, Portfolio Diversification, Risk-Adjusted Return.

---

References :

1. Ali, Aran. (2023, May 16). Ranked: The World’s Top 50 Endowment Funds. Visual Capitalist. https://www.visualcapitalist.com/worlds-top-endowment-funds/
2. Allen, Steven. (2013). Financial Risk Management: A Practitioner’s Guide to Managing Market and Credit Risk (2nd Edition). New Jersey: John Wiley & Sons, Inc.
3. Ben-David, I., Graham, J. R., & Harvey, C. R. (2013). Managerial miscalibration*. The Quarterly Journal of Economics, 128(4), 1547–1584. https://doi.org/10.1093/qje/qjt023.
4. Bernstein, William J., (2018). The Intelligent Asset Allocator: How to Build Your Portfolio to Maximize Return and Minimize Risk (1st Edition). McGraw-Hill Professional.
5. Bodie, Z., Kane, A., & Marcus, A.J. (2014). Investments (10th Edition). New York: McGraw-Hill Education.
6. BPUDL (2022, November 16). 22 PTNBH Discussed The Management of Endowment Fund. Agency for University Business and Endowment Fund Management (BPUDL), Institut Teknologi Bandung. https://bpudl.itb.ac.id/22-universities-discussed-the-management-of-endowment-fund/
7. Brealey, R.A., Myers, S.C., & Allen, F. (2017). Principal of Corporate Finance (12th Edition). New York: McGraw-Hill Education.
8. Clarke, R. G., de Silva, H., & Thorley, S. (2018). When does Capitalization-Weighting Outperform? Factor-Based Explanations. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3172498
9. Contreras, O. E., Lizama, C., & Stein, R. A. (2016). The old ways are (sometimes) the best: The performance of simple mean-variance portfolio optimization in various markets (pp. 1–25). Investment Company Fact Book.
10. Crouhy, M., Galai, D., Mark, R., (2014). The Essentials of Risk Management (2nd Edition). New York: McGraw-Hill Education.
11. Elton, E.J., Gruber, M.J., Brown, S.J., Goetzmann, W.N., (2014). Modern Portfolio Theory and Investment Analysis (9th Edition). USA: John Wiley & Sons, Inc.
12. Ferri, R.A., (2010). The ETF Book: All You Need to Know about Exchange-Traded Funds. USA: John Wiley & Sons, Inc.
13. Gitman, Lawrence J., Zutter, Chad J., (2015). Principles of Managerial Finance (14th Edition). England: Pearson.
14. Gross, L. R., (1999). The Conservative Investor’s Guide to Trading Options. Wiley.
15. Halim, N.A., Yuliati, Ari., (2020). Markowitz Model Investment Portfolio Optimization: A Review
16. International Journal of Research in Community Service, Vol. 1, No. 3, pp. 14-18,2020.
17. Hillson, D., & Murray-Webster, R., (2017). Understanding and Managing Risk Attitude. https://doi.org/10.4324/9781315235448.
18. Johnson, G., Whittington, R., Scholes, K., Angwin, D., & Regner, P. (2021). Exploring strategy: Text and cases (12th ed.). Pearson.
19. Kimmel, Paul D., Kieso, Donald E., & Weygandt, Jerry J., (2011). Financial Accounting: Tools for Business Decision Making (6th edition). New York: John Wiley & Sons.
20. Kourtis, A., (2016). The Sharpe Ratio of Estimated Efficient Portfolios. Finance Research Letters, Norwich Business School 17 (2016) 72-78. http://dx.doi.org/10.1016/j.frl.2016.01.009
21. Kulali, I., (2016). Portfolio Optimization Analysis with Markowitz Quadratic Mean-Variance Model European Journal of Business and Management, Vol. 8, No. 7, 2016.
22. Markowitz, H.M., (1952). Portfolio Selection. The Journal of Finance, 7, 77-91.
23. Markowitz, H.M., (1959). Portfolio Selection: Efficient Diversification of Investment. New York: John Wiley & Sons, Inc.
24. Merna, T., & Al-Thani, F., (2008). Corporate Risk Management. John Wiley & Sons, Inc.
25. Miller, Lee J., and Nguyen, Anuchit. (2020, January 16). Indonesia to Become Southeast Asia’s Biggest
26. Stock Market. https://www.bloomberg.com/news/articles/2020-01-15/indonesia-is-set-to-become-southeast-asia-s-biggest-stock-market
27. Ross, S. A., Westerfield, R. W., & Jordan, B. D. (2018). Essentials of Corporate Finance. McGraw-Hill Education.
28. Shadabfar, M., Cheng, L. (2020). Probabilistic Approach for Optimal Portfolio Selection Using a Hybrid Monte Carlo Simulation and Markowitz Model. Alexandria Engineering Journal (2020) 59, 3381-3393. https://doi.org/10.1016/j.aej.2020.05.006
29. Simamora, Pamela., (2021). A Road Map to Zero-Net Emission Energy Sector in 2050. Institute for Essential Services Reform (IESR).
30. Siregar, Reza Yamora., Prabowosunu, M.A., (2022). Economic Bulletin – Issue 4. Energy Transition and the Financial Sector in Indonesia. Indonesia Financial Group (IFG), Indonesia.
31. Surtee, Taariq G.H., Alagidede, I.P. (2022). A Novel Approach to Use Modern Portfolio Theory. Wits Business School, University of the Witwatersrand, Johannesburg, South Africa.
32. Swedroe, Larry E., (2011). The Quest for Alpha: The Holy Grail of Investing. New Jersey: John Wiley & Sons, Inc.
33. Thompson, A. A., Peteraf, M.A., Gamble, J. E., & Strickland III, A. J. (2020). Crafting & Executing Strategy: The Quest for Competitive Advantage: Concepts and Readings. McGraw-Hill Education.
34. Verdiyanto, R. N., Sudrajad, O. Y., and Meyriska, F. (2020). An Empirical Implementation of Markowitz Modern Portfolio Theory on Indonesia Sharia Equity Fund: A Case of Bahana Icon Syariah Mutual Fund. Journal of Accounting and Finance in Emerging Economies, 6 (4) 1159-1172.