As consultants, one of our key responsibilities is to inform and educate our clients on issues affecting the funds they oversee. Since our firm’s founding, we have emphasized the primacy of asset allocation, which is the principal component of an investment policy.
Asset Allocation
Our asset allocation analysis process begins with a thorough review of the investment practices and financial circumstances of the fund. Based on the results of this review, we recommend an overall risk posture that includes specific strategic asset allocation targets and allowable ranges around these targets. The goal is to provide our clients with recommendations for a suitable combination of:
- Long-term return expectation
- Risk control
- Inflation protection
- Liquidity
- Flexibility
We also evaluate whether there are asset classes not present in an investment program that should be considered for inclusion. In addition, we review and make recommendations for the fund’s statement of investment policy.
Asset Liability
We conduct asset/liability modeling using an integrated Monte Carlo simulation. Our model goes beyond the basic framework of expected return and volatility. We use actual plan data and liability assumptions in our model. This customized approach includes evaluation of varying cost measures and time frames to fully explore the risk/reward landscape of any specific plan. This asset/liability framework allows our clients to fully understand the inherent risk of their investment program.
As part of our process, we review a client’s investment policy, investment strategy, and portfolio mix quarterly in conjunction with preparing performance reporting.