Asset allocation to meet your investment objectives
We make comprehensive asset allocation recommendations. Our asset allocation process considers your unique investment objectives and constraints, including:
- Return expectations
- Risk tolerance
- Liquidity constraints
- Time horizon for investments
- Tax constraints
- Other unique circumstances
Once objectives and constraints are established, our team reviews the available opportunity set for investment. This includes traditional and alternative investments to determine the appropriate asset classes.
The process for our modeling and capital market assumptions
We use efficient frontier optimization and Monte Carlo simulation. These take our capital market assumptions and evaluate the optimal portfolio allocations based on different risk levels. We focus on the development of return, volatility, and correlation assumptions to provide the best asset allocation analysis.
We have a specialized team of consultants and analysts who focus their research on monitoring capital market and industry trends to evaluate the implications on client assets. This analysis generates inputs based on a combination of historical data and projected returns to develop short- and long-term capital market assumptions.
Short- and long-term asset allocation assumptions
Our short-term assumptions consider the current market environment and attempt to identify themes expected to impact markets in the near future. These assumptions offer you the opportunity to use dynamic asset allocation based on these themes.
When there are no directional indications of market themes, our short-term assumptions gravitate toward long-term capital market assumptions. These assumptions are based on the historical performance and relationships of asset classes.
Our three-pronged approach
After evaluating the returns provided by various asset allocation scenarios, we use a three-pronged approach to further:
1. Analyze worst-case scenarios
2. Estimate the probability of meeting objectives
3. Model multi-factor risks
These tools allow us to evaluate potential downside risks and exposure to various risk factors. We create a more robust asset allocation review that identifies the risks to your capital in extreme environments.
Using multiple forms of analysis in the asset allocation review process better evaluates the risks that affect the portfolio over time. This additional analysis helps investment committee members evaluate asset allocation decisions.
Want to learn more about our asset allocation services? Contact Ellwood.