Asset allocation models

Abstract

Asset allocation models are the vehicles investment managers use to meet clients’ financial goals and objectives. A well-researched and closely monitored model can go a long way in enhancing the asset management firm’s credibility. Research teams have to do in-depth analysis of various asset classes available in a market and drill down to identify investment ideas that will produce optimum return with the right risk. Investment management firms segment their customers and allocate models that will fit the needs of each segment. This paper looks at five major categories of clients and describes in detail the asset allocation model that fits their return and liquidity needs. Various security types are described with a focus on models based on exchange traded funds (ETFs). ETFs track an underlying index closely and are a passive, low-cost way of investing. Models ranging from aggressive to conservative are explained along with their detailed constituents.