It is believed that asset allocation plays the most important role in generating sustainable returns for investment portfolios*. During years of turmoil such as 2008, traditional strategies experienced not only outsized drawdowns but also vastly reduced benefits from diversification owing to unprecedented surge in cross-asset correlations. Investor inertia in adjusting their strategic asset allocations and other structural barriers create market dislocations where prices drift away from fair values. A Global Tactical Asset Allocation strategy (GTAA) can add value to portfolios by reducing asset class specific draw-downs and by capitalizing on such market dislocations. GTAA strategy adds value by gaining tactical exposure to the ‘correct’ asset class (beta rotation) and by country / sector selection (alpha).
Our Global Tactical Asset Allocation strategy is a “go anywhere” type of strategy that provides access to multiple asset classes via tactical allocations to Global equities (US, EAFE and Emerging Markets), Global Fixed Income (Sovereign, Investment Grade and High Yield), Commodities and Currencies. Our strategy utilizes liquid US listed ETFs & dollar denominated securities to gain exposure to these asset classes. Although GTAA strategies share some characteristics with Global hedge funds, our strategy differs in significant ways as it does not use external leverage and provides a high level of transparency and liquidity.
The objective of the strategy is to generate positive returns by exploiting inefficiencies in the pricing of global and regional macro variables and in the valuation of out-of-favor asset classes, countries, sectors and currencies. Our strategy emphasizes capital protection during times of market turmoil (reducing left-tail risk) by using cash allocations and by reducing active risk exposures. During times of lower macro and market volatility, our strategy emphasizes global equities so as to generate returns in a risk efficient manner by making country, sector and currency allocations to outperform the index as opposed to building the portfolio on the basis of bottom-up company analysis.
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