An investigation into the strategic investment vehicles that are used to hedge against inflation by certain asset management firms.
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The purpose of this report is to offer an independent evaluation of strategic investment vehicles that are used to hedge against inflation by asset management companies in Zimbabwe. Zimbabwe's inflation stood at an alarming 536% at the end of December 2003,which gives the research enough motivation to establish the best inflation hedging instruments ideal in such a highly volatile and unstable environment. Since 1999 to date many companies have shut down and or scaled down their operational activities due to the adverse inflationary trading environment. This paper therefore serves to find out whether AMC's have strategic products to save corporations. The investigation starts off by discussing the Zimbabwean inflationary situation and followed by the research's main goals, investigative questions and the reason and value for carrying out the study. The pertinent literature is then discussed and evaluated with particular emphasis on the role of asset portfolio management. The research analyses the traditional asset classes and compares their attributes to the alternative investment classes in particular with real estate investments. Previous research studies support the view that real estate retains value and that it is an instrument for the protection of asset erosion caused by the effects of inflation. The empirical findings from this study have established that real estate investments have higher returns than inflation cumulatively. As a result real estate investments offer diversification benefits within any investor's efficient portfolio. Upon reflection of this investigation's findings some recommendations are made. Firstly the study recommends that rational investors should include real estate on their diversified portfolios in order to maximize shareholder wealth. Secondly we recommend that asset managers should push for higher holding weights when making strategic decisions on asset allocation. There is a potential for more appetizing alternative investments for the Zimbabwean investor and asset managers need a paradigm shift to include more alternative forms of investments in their portfolios.