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Our special report describes our approach to Strategic Asset Allocation (SAA) – the key driver of multi-asset portfolio returns.
SAA involves the optimum allocation of investment between different asset classes in a way that is appropriate both for the client’s preferences and their geographic location.
But SAA has to take place against a background of uncertainty: no one can claim to be able to predict with certainty the return, volatility and correlations of and between individual asset classes. Traditional asset allocation processes attempt to side-step such uncertainty, often leading to sub-optimal outcomes.
The focus of our own SAA process is therefore to achieve robustness amidst uncertainty. We distinguish between what we can predict with reasonable certainty, and those areas which must be more unpredictable. Focusing on the areas that we understand better, we use this knowledge to create SAA that are designed to be more robust to future events – and perform better over time.
This new CIO Special – Strategic Asset Allocation – Robustness amidst uncertainty – explains how we do this. We also discuss additional steps in our investment process, including the role of risk return engineering.
SAA aims and features:
- SAA: accounts for the bulk (90%) of portfolio returns.
- Address uncertainty: know how different outcomes could impact portfolios.
- Robustness: a key portfolio objective, reduce vulnerability points.
