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Asset Allocation

There Are Many Steps To Creating An Asset Allocation

Looking toward the future, not the past.

Since asset allocation is the primary driver of portfolio returns, a proper asset allocation is the first step in designing a good portfolio and is the starting point for creating your customized portfolios. We start by working together to select the asset classes which best suit the needs of your business. When we have decided upon the asset classes, a traditional risk/return approach is used with modifications to make the results far more meaningful:

  • Returns are adjusted to reflect today’s reality and not simply mimic the past.
  • Risk levels are adjusted as they may not be accurate or do not reflect the reality of investing in funds or ETFs.
  • Correlations are checked to ensure that they make sense and modified if they do not.
  • Proper constraints are used to ensure good diversification for your portfolios.
  • A critical eye provides one last check to ensure that the results are reasonable and suited to your needs.

The result of all these steps is the generation of your customized efficient frontier of asset classes. From your efficient frontier, you can choose the various risk profiles (usually spaced in even increments) which will make up your asset allocations for different risk levels. These asset allocations — designed for your specific requirements — will provide the foundation for the portfolios created later.