We adhere to a disciplined approach to investing that takes a long-term view and is based on the principles of asset allocation.
Step 1: Set return and risk expectations. For the three broad asset classes—equity, fixed income, and alternatives—we set risk return expectation based on historical data and current market conditions.
Step 2: Set broad asset allocations. For each portfolio, we set broad asset allocations based on the following constraints: an asset class must constitute at least 10% of the portfolio to be included, and alternative assets are capped at 33% of the portfolio.
Step 3: Set sub-asset class allocations. Broad asset class allocations are further divided into each subcategory within the asset class (for example, large cap versus small cap, foreign stock versus domestic).
Step 4: Select portfolio investments. Individual funds and managers are selected for each portfolio based on their return and risk characteristics and how they correlate with other investments in the portfolio.
Our process is continuous in nature, as we regularly reevaluate our market outlook, performance expectations, and convictions in individual funds and managers.
This disciplined process results in a series of asset mixes designed to match a variety of objectives.
