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Global Asset Allocation Strategy

SMART Asset Allocation Division provides global investment advisory services to company-sponsored mutual funds and discretionary managed account services for high net worth individual and institutional clients including foundations, pension funds, endowment funds, corporations, institutions and businesses, tapping SMART's expertise in fixed income securities, equities, private equities, hedge funds and real assets. Based on a thorough and systematic confidential client profiling, the Asset Allocation Division initially ascertains the client's risk-return profile, investment objectives, future consumption requirements, investment period and incorporates them into an Investment Policy Statement (IPS).

Our asset allocation strategies are futuristic and proactive. They aim at achieving superior returns at reduced risk. We incorporate various lead indicators for expected parameter (return and risk) smoothing, rather than depending on long-term return and risk parameters of various investment products for asset allocation within a single period framework (Harry Markowitz's mean-variance optimization). We believe that asset allocation strategies are constantly influenced by the dynamism of various economies and their markets such as rising oil prices, long-run interest rate conundrum, looming inflation, the predicament of rising US deficit, increasing current account surpluses among emerging countries as against increasing current account deficits among industrialized countries, and the baby-boomer syndrome in the industrialized countries.

SMART's asset allocation process is rigorous across various regions/countries and asset classes. Driven by the investment strategy theme, the Asset Allocation Division applies various securities market quantitative models for global investment positioning.

The asset allocation strategy adopted by our Asset Allocation Division is based on the results of quantitative modeling and back-testing over the long-run. They are proven and appropriately benchmarked. We look for active alphas across various regions/countries/assets within the various asset classes.

We also deviate from the popular hypothetical belief that markets are efficient as widely used in traditional capital asset pricing models (Sharpe and Lintner's Capital Asset Pricing Model).

In a theoretical framework, an efficient market and an efficient portfolio may exist, but not in the real world, as investors have various constraints and preferences. Strategists and investment managers have their own views on different assets or asset classes’ performance, which are dynamic and change over time. Pension funds, endowment funds, insurance companies and mutual funds, though may aim at achieving superior and stable performance, may be constrained by their home-bias, risk preferences and asset-liability matching criteria. Similarly, individual investors may be constrained to operate within a restricted market. All these result in price anomalies across various regions and asset classes. Though markets are static at any given point in time, investors are always looking for better investment opportunities and discover price anomalies that may best fit their constraints and risk preferences. Our asset allocation strategies are client-focused and incorporated into customized Investment Policy Statements.

Should you require further information on our asset allocation strategy or would like to design an Investment Policy Statement or have specific asset allocation or product development requirements, kindly contact us at smartam@smartinternationalholdings.org.

Related Areas: Global Investment Strategy, Performance Measurement- Benchmarking and Attribution Analysis, Product Development- Investment Products and Managed Accounts, Wealth Management Strategy.

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