Asset Allocation

Adaptive Asset Allocation is our proprietary methodology of developing portfolios to match the ever changing economic environment and the monitoring and adjustment of those portfolios as warranted.  We view this as an ongoing process with three phases.

Asset Class Selection

Asset classes are selected for consideration based upon their proability to perform well in our assesment of future macro economic conditions. The research methodology and analytical framework leading to the selection are periodically reviewed.  This is also the level at which the investment policies regarding objectives and acceptable risk are established.  The outputs from this top level process are a specific group of asset classes, indexes, and eligible securities along with acceptable ranges of inclusion within our portfolios as well as overall risk parameters.  

Portfolio Optimization

Using an optimization algorithm (using Modern Portfolio Theory or MPT) model portfolios are developed to help maximize the return for a given level of risk.  A key feature of this process is the use of forward-looking indicators for return rather than past returns (as many other practitioners do). The results of the portfolio optimizations are reviewed and compared to current allocations.  This quantitative information, along with other economic and market data, is used to make judgements regarding changes to the current allocation.  Client portfolios may differ from the model portfolios; deposits and withdrawals may result in additional or different transactions.

Portfolio Monitoring

Portfolio performance is monitored in an ongoing feedback loop. Economic and market indicators are observed and their ramifications on the portfolios considered.  Rebalancing is typically triggered by market conditions that have caused indiviual portfolios to deviate significantly from the model portfolio weightings. Overbought or oversold conditions are viewed as rebalancing opportunities.   

Neither asset allocation nor diversification guarantee a profit or protect against a loss.