- Conduct extensive discussion with client and advisor to review several possible strategic asset allocation choices before settling on the long term investment policy.
- Set priorities for cash yields, risk levels, and capital appreciation.
- Reach agreement on downside tolerance during normal and under excessively volatile periods.
Our strategic asset allocation is determined by three factors:
- Macroeconomic and political outlook, US, and Emerging markets.
- Industry outlook.
- Company fundamentals and valuations.
Each client’s financial personality and capacity for financial risk should be a determinate in setting their strategic asset allocation, not industry standard benchmarks.
Define a risk mitigation plan for non fundamental excessive market distortions.
Adopt a flexible approach within the strategic plan.
As fundamental trends change we employ tactical changes to the strategic asset allocation based on fundamental factors. We believe tactical changes should be made when fundamentals turn negative to reduce systematic exposures or when fundamental turn excessively positive to seek exceptional return opportunities.
Using forward looking macroeconomic indicators, corporate profits and stock market valuation indicators to make tactical changes to the strategic asset allocation.
We do not trust that bad outcomes cannot happen and have a dynamic equity risk management process that can act as a circuit breaker against non fundamental increases in downside volatility.
Structural changes to developed equity market economies (US, Europe) have resulted in a reduction in available diversification benefits and potential lower expected returns.
We believe greater global emerging market representation is warranted for clients seeking to enhance capital appreciation potential.
We believe the appropriate use of lower volatility investment strategies will reduce systematic risks and offset the loss of diversification occurring within developed equity markets. Allocations to non traditional strategies can also increase return at each level of risk.
We believe stock market investing involves greater tail risks than normally expected, which supports a portion of clients’ portfolio to be allocated to a lower volatility hedged strategy.