Propose an Optimum Stocks Portfolio Using Markowitz Modern Portfolio Theory in Educational Endowment Fund Management (Case Study of XYZ Institution)

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.