Best Practices: Old School vs. New School

Many of the tools for developing policy portfolios based on computer models have been utilized for quite some time. Traditional mean-variance optimization models can often fail to achieve efficiency due to simplified or flawed assumptions, reliance on the bell-shaped curve, lack of staying power, or difficulties in valuing illiquid assets.

Economic Environments and Their Impact On Asset Prices

In today’s complex and quickly changing world of investing, we face the necessity of an increasingly dynamic approach to asset allocation. We must understand economic drivers and environments, balancing those risks in allocating assets. Such flexibility allows managers to alter asset allocation in unusual and volatile market environments to improve performance or reduce risk.

Making The Investment

The policy portfolio is simply a means to an end – a guide to our investment choices that should not restrain us from capitalizing on market opportunities. When following an active asset allocation strategy, we must remember that it takes years to build a high-quality and diverse portfolio of alternative managers. We need to constantly evaluate our asset allocation to confirm its balance with respect to our investment goals.