Multiple Asset Class Portfolios


The primary objective of the multiple asset class portfolio is an attractive risk adjusted return.  The secondary objective(s) can vary considerably, and are based upon the client’s unique investment objectives.  These objectives can range from conservative to aggressive in nature, such as low volatility, high yield, balanced total return and tax efficient growth.


Each separately managed multiple asset class portfolio employs a mix of targeted asset classes to achieve the client’s unique investment objectives.  Portfolios are generally constructed with domestic and international equity, fixed income, cash and other asset categories.
In the broad universe of capital markets there are many asset classes for investors to choose from.  Each asset class has relatively unique risk and return characteristics, offering nearly limitless asset mix possibilities.  This makes the asset class selection and allocation the most important decisions of the portfolio management process.  We take a value oriented, purposeful approach to asset class selection.  Typically, the asset class landscape is narrowed to eight or fewer asset categories that are target weighted to achieve the intended portfolio outcome(s). Periodic portfolio cash flows are then reinvested in the most attractive categories, if not needed for liquidity purposes.
The main ethos of this strategy is to select a diversified mix of investments that are expected to compliment each other over a full market cycle, thereby enhancing the portfolio’s risk adjusted returns and achieving the client’s investment objectives.  We employ both ‘top down’ and ‘bottom up’ analyses to identify the most attractive asset classes and individual securities.
‘Top down’ analysis
Our top down analysis focuses on capital market trends, including but not limited to, asset class correlations, yield curve slope, credit spreads, inflation expectations, monetary policy, regulatory environment and other economic factors.  This analysis determines the most attractive asset classes on a relative basis.  For fixed income allocations, this analysis also determines portfolio average credit, maturity, effective duration and convexity targets.
For multiple asset class portfolios, the analysis of asset class correlations is arguably the most important variable.  Generally, the market prices of risk asset classes (e.g., domestic equities) and risk averse asset classes (e.g., government bonds) are negatively correlated over a full market cycle.  This implies that if domestic equity prices are falling, government bond prices are rising, and vice-versa.  By employing a diversified multiple asset class investment strategy with both risk and risk averse asset classes, portfolio volatility and expected return can be managed more scientifically than owning any one asset class by itself.  This in turn enables us to design portfolios that achieve client specific objectives with greater probability.
Asset class returns and correlations change as capital markets evolve, making the ideal asset allocation strategy a moving target over time.  As our expectations of markets and client objectives change, asset allocation targets are adjusted.
‘Bottom up’ analysis
The core tenet of our bottom up analysis is value investing.  When evaluating equity securities, we have a business owner mentality. We favor companies we can understand that possess durable competitive advantages and are attractively priced.  We analyze a variety of factors to determine intrinsic and relative value, including but not limited to, earnings growth, quality of earnings, balance sheet strength, market share, barriers to market entry and quality of management.
When evaluating fixed income securities, we have a lender mentality.  We begin with a careful analysis of the institutions underlying credit, followed by the yield spread of the security relative to similar investment opportunities.
In addition, we may allocate assets to mutual funds, closed end funds or exchange traded funds (ETFs) to provide diversified asset class exposure.  For these allocations we generally favor low cost and tax efficient funds.

Each client’s investment objectives, risk tolerance, income needs and time horizon are evaluated during the Consultative Process to determine the most appropriate portfolio strategy, asset allocation mix and individual security selection.

Learn more about our other investment strategies by visiting Fixed Income Portfolios.
Learn more about the Firm by visiting Core Guiding Principles and Investment Philosophy.