In this new CIO Special, we look at what we mean by “robustness” in the context of Strategic Asset Allocation (SAA). 

 

Portfolios need to show robustness as market conditions – and the relationships between asset classes – change. Classical investment approaches try to rationalise this complex world by making a range of simplifications or “rules of thumb”. These can unfortunately make portfolio performance very fragile if the underlying assumptions around future asset class behaviour prove to be wrong.

 

Our approach to SAA, in contrast, acknowledges that we are living in an uncertain world and focuses on making portfolios robust to changes in these underlying assumptions. Some asset class relationships can be predicted more consistently than others, and we need to avoid concentrations of risks where outcomes are particularly uncertain. Understanding uncertainty is key to robustness.

 

In addition, we look at:

  • How robustness is different from risk management
  • The key features we use to increase robustness
  • What is the price of robustness

 

To download a PDF of the full report, please click here.

 

In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved. Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk. 

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