Question 18: Asset allocation frameworks (4 marks in total) Under modern portfolio theory, an investor uses mean-variance portfolio optimization to generate the efficient frontier, and then selects the portfolio on the frontier which accords with their risk preference. (a) Describe four (4) major problems with using this approach to form portfolios in practice. (2 marks) (b) Outline two (2) alternative approaches that an investor might use to set their asset allocation. In doing so, identify which problems with mean-variance optimization that each approach helps to overcome. (2 marks)