Our Process - Formulate Policy and Allocate Assets

"A formal written investment policy is drafted for each client that serves as a guide for all decisions regarding asset allocation and risk levels."

Once the objectives, constraints and risk tolerances of the investor have been defined, they are converted into a strategic investment policy. This policy is expressed in terms of percentage allocations to selected asset classes and often identifies various styles within the broader asset classes.

• Appropriate asset classes are selected, considering potential reward and risk tolerance, liquidity, tax, transparency and other issues. Constraints are then applied to these asset classes in order to reflect a realistic allocation for the investor and to reflect any assets not included in the supervised accounts.
  
  
• We then analyze various efficient asset allocations through mean variance optimization. Optimization is input with estimated future risk, reward and cross correlation over an appropriate time horizon.
  
  
• Specific allocations may be stress tested for different market conditions.
  
  
• Optimization is effected on a pre-tax and after-tax basis. After-tax returns are calculated on a proprietary in-house system, reflecting the incidence of tax on the various styles of management.
  
  
• Projected spending flows are considered and may be anticipated in constraints on volatility and allocation to more liquid asset classes.
  
  
• Once the optimization of asset classes has been effected, manager names with estimated future returns are put into the optimizer and studied on a pre-tax and after-tax basis.
  
• Where appropriate, Monte Carlo simulation models are employed in order to ascertain the probability of possible future returns.
  

Once the above has been concluded, a statement of objectives and constraints is set out in a strategic investment policy. This policy is actively employed to control deviations from policy that will develop over time. Once a policy is implemented, tactical allocations and rebalancing are considered quarterly as part of the portfolio monitoring process.