Asset Allocation

Investment success is not simply about trying to ‘pick winners,’ but rather strategically allocating your portfolio to the right mix of asset classes at the right time aligned to your risk tolerance. Proper asset allocation serves as the cornerstone of long-term performance, playing a vital role in maximizing returns and minimizing risk.

The Role of Asset Allocation

Risk Management

Managing investment risk with clear policies and procedures

Long-Term Discipline

Meeting regulatory and compliance obligations

Our Approach

Asset allocation serves as a cornerstone of successful investment management, encompassing the strategic process of dividing a portfolio among various asset classes like stocks, bonds, cash, and alternative investments. The primary objective of asset allocation is to construct a well-balanced portfolio that aligns with your unique financial goals, risk tolerance, and time horizon.

When it comes to portfolio performance, asset allocation plays a pivotal role. Research indicates that asset allocation accounts for approximately 94% of portfolio returns*, surpassing the impact of market timing and security selection in the long run.

*Brinson et. al, Determinants of Portfolio Performance (1986, 1991)

Strategic Asset Allocation

Strategic asset allocation forms the bedrock of our portfolio construction process. We employ the power of Mean-Variance Optimization (MVO) to systematically determine the optimal mix of asset classes that aligns with your long-term investment goals and risk tolerance.

Using MVO, we apply mathematical models that consider the expected returns, standard deviations, and correlations of asset classes to determine the optimal allocation. MVO helps us find the mix of asset classes that provides the highest expected return for a given level of risk or the lowest risk for a target level of return. It allows us to strike the optimal balance between risk and return in constructing your portfolio, providing a solid foundation for long-term success.

Tactical Asset Allocation

Our tactical asset allocation process is designed to leverage market conditions while maintaining our disciplined investment approach. We strive to identify potential opportunities for outperformance by selectively overweighting asset classes or sectors, all within the framework of predefined asset bands. Asset bands are predetermined ranges or thresholds that we establish for each asset class within the portfolio. They set upper and lower limits to the allocation percentage for each asset class, ensuring that our adjustments remain within a defined range.

Asset Class Selection

We take a comprehensive approach to portfolio construction, carefully selecting a range of asset classes based on their historical risk and return characteristics. Each asset class plays a distinct role in your portfolio, offering potential growth, income generation, capital preservation, or diversification benefits.

Our goal is to construct portfolios that align with your financial goals and risk tolerance. By analyzing various asset classes, we create a diversified mix that optimizes the risk-return trade-off and enhances the potential for long-term success.

Alternative Investments

Alternative investments offer diversification beyond stocks and bonds. With asset classes like private equity, hedge funds, real estate, commodities, and structured products, they enhance portfolio resilience. By blending traditional and alternative investments, we optimize diversification, manage risk effectively, and pursue attractive returns. These non-traditional assets provide access to unique markets, sectors, and investment strategies, potentially delivering enhanced risk-adjusted returns.

Rebalancing Strategies

Once the initial strategic asset allocation is established, we continuously monitor and periodically rebalance the portfolio. Market fluctuations and changes in asset class performance can cause deviations from the target allocation. Rebalancing involves adjusting the portfolio back to the original strategic asset allocation to maintain the desired risk and return characteristics over time.