Asset Allocation
Once client goals are set, the initial phase of investing assets can be implemented. Generally speaking, asset allocation is the process by which investment capital is divided up by a given investment type. Asset allocation theory views investments from a statistical perspective. These statistics take into account historical and expected data that allows one to make decisions as to how to balance evidenced risks with the pursuit of return. This process, also known as optimization, can be applied to any security, investment fund, or trading strategy with historical data in the marketplace. In the past, equity oriented investments have been characterized by their size, style, and geographic focus. Fixed income investments are typically viewed through the prism of credit quality, and maturity. Finally, a category of investment that does not fit into the traditional equity or fixed income category is generally labeled as "alternative." Alternative investments are best seen as trading strategies rather than security types. While we directly manage only equity and fixed income disciplines, we are able to use our asset allocation optimizer to include or exclusive any asset class or security a client would like to contribute to the exercise. Quorum is currently undertaking research into developing more consistent investment classifications that allow an asset allocation analysis to be undertaken purely from a "security type," and "strategy employed" perspective to create a more financially meaningful efficient portfolio. It is hoped that as investors discover new investment vehicles, our asset allocation methodology is and will be refined to accommodate the diversity of offerings the investment community has to offer. |