Since our firm’s founding, EnnisKnupp has emphasized the importance of asset allocation as the principal component of an investment policy.
Our asset allocation analysis 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, including specific strategic asset allocation targets and allowable ranges around these targets. Our goal is to provide a suitable combination of long-term return expectation, risk control, inflation protection, liquidity, and flexibility.
We consider whether there are asset classes not present in the investment program that should be included. We also review the fund’s statement of investment policy, recommend changes where appropriate, and update it for any policy changes adopted.
Structuring an absolute return program has special considerations, including, but not limited to:
- Role within the total program
- Targeted long-term allocation and speed with which that allocation is to be achieved
- Overlap with other asset categories
- Liquidity needs
- Tolerance for beta (transient or persistent in nature)
- Willingness to oversee a complex versus streamlined program
- Attitude on breadth of category (For example, Could non-hedge fund structures have a role? What about actively managed commodities?)
- Attitude on transparency of holdings
- Tolerance for individual funds being “headline risks”
In devising an investment strategy, we combine the qualitative elements above with quantitative modeling to determine the appropriate mix of strategies at the macro level. This may include hedge fund of funds, macro- and multi-strategy managers, long-short equity managers (market neutral or not), commodities managers, and even specialty managers such as activists, and event-driven strategies.