The current market value of WTL’s pension portfolio is GBP 1,140 million, with a 75% allocation to UK energy stocks and a 25% allocation to UK bonds. The stock allocation has a beta of 1.20, whereas bond allocation has a modified duration of 6.15. Mills forecast suggests that in the near term, energy stocks are likely to underperform. After discussions with the plan sponsor, Mills decides to reduce allocation to energy stocks to 55% and increase allocation to UK bonds to 45% by using the FTSE Energy Index futures and UK Bond Index futures.
I am having doubts over the solution - Doesn’t the price of the Futures be that of FTSE Energy Index Futures (10070 instead of 138.5)?
