Tactical Asset Allocation
The flexibility to adapt the investment strategy to changing circumstances
Tactical Asset Allocation is the process of managing the portfolio’s
exposure to macro-economic and market developments. It creates the
flexibility to respond to risks and opportunities as they arise, by
changing the portfolio’s percentage allocation to asset classes,
markets, and individual portfolio managers.
Tactical asset allocation is a two-stage process:
Our Asset Allocation Committee reviews the portfolios on a monthly
basis, discussing how new opportunities and market risks should be
addressed. The quality and experience of our Committee members is
one of our core assets. Our investment management team responds by re-allocating portfolios
across the selected managers.
When a tactical allocation requires that new specialists are brought
into the portfolio, the team initiates a search for such managers,
both through research consultants and our own database.
We believe that tactical asset allocation is becoming more and more
important. Risk has become much more tangible to investors; the need
for diversification follows immediately from that. At the same time,
new opportunities arise in far more areas than just the domestic bond
and equity markets. Both risk and return require “casting the net far
wider” than ever before. The required skill set of successful
investors has changed accordingly: from “star stock pickers” to global
asset allocators. Yet most investment professionals, having grown up
in the bull market of the 90s, lack precisely that expertise.
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