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Home : Strategy Discussion : Asset Allocation Strategy |
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Tactical Asset Allocation: Philosophy and Process
Analytic's Tactical Asset Allocation (TAA) strategy is designed to complement a client's long-term strategic investment objective by capitalizing on the shorter-run deviations in
standard asset class return and risk relationships in a cost-effective and risk-controlled manner. To this end, Analytic has developed a systematic process that utilizes robust return forecasting models which vary by asset class and consider multiple factors.
Using the client's
chosen benchmark as an anchor, our return forecasting model is combined with optimization and risk control techniques designed to maximize incremental return per unit of incremental risk. Analytic uses stock and bond futures for implementation, keeping transaction costs low, and transaction costs
are taken into account before optimization.
Given a client's existing domestic benchmark weightings, Analytic identifies optimal deviations from those weightings based on its quantitative modeling approach. Analytic maintains quantitative forecasting models for the U.S. equity and fixed
income markets. Output from these forecasting models is incorporated into a proprietary asset allocation program, which combines the return forecasts with a state of the art method of measuring risk to generate recommended deviations from the client's benchmark weightings.
Implementation
of the TAA program begins with the collection and input of all relevant variables driving the asset return models. Analytic's models incorporate multiple factors covering market valuation, economic conditions, investor sentiment.
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Focus on incremental shifts in portfolio composition to complement strategic, long-term investment objectives |
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Incorporate incremental risk and costs in optimization |
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State-of-the-art forecasting and optimization techniques utilized |
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Ongoing research underlies models and techniques |
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Available as an overlay to an existing portfolio or can be used to create a balanced portfolio |
The models are updated each day, generating a revised evaluation of relative attractiveness. These measures of relative attractiveness are mathematically combined in a non-linear optimizer with the client-specified risk constraints to update the
recommended allocation. The average monthly shift in asset allocation is about 5% as the models capture the gradual changes in asset class relationships and only engage in turnover when it makes economic sense. Our professionals conduct ongoing research to ensure that our models and techniques
continue to add value.
Since 1985 Analytic Investors has refined its tactical asset allocation methodology to encompass a global panorama represented today by the world's 12 largest developed markets. We believe that, despite the internationalization of trade and
markets, each country possesses a singular and dynamic economic climate. Each local market performs differently and behaves uniquely relative to other economies.
At Analytic Investors we strive to exploit these differences. We construct and actively manage portfolios for
institutional investors composed of stocks, bonds and currencies - which we regard as separate asset classes.
In a changing world of intricate and shifting relationships, we employ sophisticated quantitative tools to minimize judgmental decisions and eliminate the home country biases that
permeate traditional global investing. Whether an investor seeks Yen-, Euro- or Dollar-denominated returns, our time-tested strategy provides a disciplined, systematic approach that anticipates shifting opportunities across the globe.
Institutional Investors
To learn more about the services Analytic Investors offers to its institutional clients, see Investing With Us, or choose an institutional portfolio from the list to the right.
Mutual Fund Investors
Individuals can invest with Analytic through several mutual funds available from Analytic and Old Mutual Advisor Funds II. Visit the Investing With Us Mutual Funds Area to learn more.
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