Model Portfolios

Model portfolios are constructed using passive and active vehicles to help meet specific investment outcomes. We present a rigorous, repeatable framework for designing optimal model portfolios, which (1) selects a benchmark portfolio that reflects a target level of risk; (2) constructs a strategic m...

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Bibliographic Details
Published in:The journal of wealth management 2019-04, Vol.21 (4), p.46-63
Main Authors: Basu, Debarshi, Gates, Michael, Karir, Vishal, Ang, Andrew
Format: Article
Language:English
Subjects:
Asset allocation
Benchmarks
Bond markets
Capital markets
Equity
Exchange traded funds
Investment advisors
Investment policy
Investors
Performance evaluation
Portfolio management
Short term
Volatility
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Summary:Model portfolios are constructed using passive and active vehicles to help meet specific investment outcomes. We present a rigorous, repeatable framework for designing optimal model portfolios, which (1) selects a benchmark portfolio that reflects a target level of risk; (2) constructs a strategic model portfolio that reflects long-term capital market assumptions; and (3) potentially, but not necessarily, incorporates tactical views in a final model portfolio, rotating positions around the strategic model holdings to reflect short-term market views. Using the framework, we demonstrate the construction of model portfolios for multi-asset-class and factor-investing applications.
ISSN:1534-7524
2374-1368
DOI:10.3905/jwm.2019.21.4.046