Accommodating diverse institutional investment objectives and constraints using non-linear goal programming

Institutional portfolio managers face a diverse mix of conflicting investment objectives and constraints such as risk and return goals, institutional liability considerations, fund management legal restrictions, institutional cash flow requirements, and portfolio management performance targets. This paper argues that lexicographic goal programming can be used to keep track of an institution's complex investment goals and will provide a best possible solution for the institution's portfolio selection problem. Three examples illustrate the applicability of non-linear goal programming to institutions' differing investment requirements.