Asset Mix Process
On a regular quarterly basis, the
Broadly, the relative influence of the factors surveyed in determining asset mix policy can be categorized as follows:
Fundamental Factors and Conditions
Asset Mix Ranges
Though asset mix ranges for any given portfolio are determined by the nature of investment objectives — low risk, high income, aggressive growth … etc. —
COMPONENTS OF GLOBAL ASSET SELECTION MODEL
The following seven categories of factors are considered in determining the relative attractiveness of the three main financial asset classes. The Asset Mix Score Sheet portrays this grading exercise. Ratings are weighted and summed to indicate the relative attractiveness of an individual asset class. A high relative rating will recommend a portfolio weighting for that particular asset class towards the higher end of its allowed range (see
All of the following categories have separate defined methodologies and approaches.
1. Super Trends and Themes
Global macro super trends such as globalization, financialization, population growth, political developments are assessed for their impact on, and attractiveness of each asset class. Investment themes are then identified relative to the performance prospects of each asset class. Factors such as capital shortages, high real interest rates, fiscal retrenchment,
2. Relative Expected Returns
Macro Environment & Fundamentals
3. World Economic Outlook (vs Consensus)
4. Monetary Policy/Credit Conditions
a. Global Monetary Policy/Conditions
b. Global Investment Liquidity Conditions
Idle cash balance conditions, interest rate trends, and conditions of excess or inadequate liquidity relative to expected economic growth trends and statistics indicative of investment fund liquidity are among the factors reviewed to help predict future relative investment returns.
5. Historical Valuation Ranking
a. Absolute Valuation Ranking (to Country History)
The valuation level — over‐ or under‐valued — of global equities and bonds are individually assessed in terms of factors independent of each other. Forstrong employs its own valuation barometers. The value rating of cash assets is considered a residual of the bond and stock ratings.
b. Relative Valuation Globally
6. Technical (Momentum, Trends)
a. Relative Performance Trends:
Global rotational trends are seen as offering important insights.