Over the last decade the global investment landscape has shifted dramatically. Central banks are having a much larger influence on markets, the risk and return characteristics of various asset classes has changed considerably, and the investment opportunity set has broadened.
In this Wealth Strategies research paper, Adapting portfolio construction to a different investment landscape, we discuss the impact of these changes on traditional Strategic Asset Allocation (SAA), the need to evolve, and the adaptation of our investment process by introducing the Total Portfolio Approach (TPA).
TPA is a different method of constructing portfolios whereby each individual investment decision is based on its own risk/return merits and influence on achieving the total portfolio objectives, rather than on asset class benchmarks. Portfolio risk and diversification are managed by ensuring there is an appropriate mix of risk factors held across the investments in the portfolio. This is in comparison to traditional SAA which begins with relatively fixed asset class allocations and then populates those asset class allocations with individual investments. TPA is a more wholistic and flexible approach.