For the majority of "cookie cutter" portfolios found elsewhere, the management approach begins and ends with strategic asset allocation. If markets were fairly fixed, day in and day out, strategic asset allocation might be all a manager needed to maintain a portfolio. But market behavior across asset classes isn’t static. It’s fluid, changing constantly. So for the Portfolio Strategy Group Investment Committee, the firm’s strategic asset allocation is merely a starting point.
The following illustration represents a hypothetical scenario and in no way a recommendation to any client. The strategic asset allocation of a portfolio determines how the assets should be invested across the various asset classes over the long term (7-10 years), based on an investor's investment strategy and personal investor profile. Short-term deviations (typically 6-12 months) from the strategic asset allocation are implemented to capture short-term market opportunities presented in response to changing market conditions. These shifts are made to the portfolio by overweighting or underweighting particular asset classes, resulting in a tactical asset allocation.