Quantitative asset allocation

Asset allocation is the process of spreading a portfolio across asset classes such as fixed income, equities (stocks), alternative investments and cash.

The quantitative model

The quantitative model is designed in particular to optimise risk exposure. The advantage of this approach is objectiveness in the selection process and discipline in implementation in the funds. The quantitative model is based on a mathematical allocation model developed by Dr. Gerd Infanger, Professor at Stanford University. This model operates within set ranges and is designed to also include opportunities defined by Gutmann. The model is characterised by the following aspects:

  • Two-pronged portfolio construction
    • 80 percent of the portfolio is invested in accordance with the mathematical allocation model in funds selected by Gutmann, with monthly adjustments
    • 20 percent is invested in accordance with in-house views in other segments, regions and asset classes not included in the mathematical allocation model (continuous adjustments, special consideration of strategies to reduce volatility and exploit opportunities)
  • Optimisation of risk exposure
  • Reduction of downside potential through high diversification
  • Continuous monitoring of target achievement and timely and flexible response to changes in the market
  • Selection of sub-funds after careful analysis, with due regard to quantitative and qualitative assessment criteria

The hedging model

Like the quantitative model, the hedging model is based on the mathematical allocation model developed by Prof. Gerd Infanger from Stanford University. It provides active risk management and is designed to limit setbacks to a defined maximum. The model comprises the following aspects:

  • Fully mathematical allocation model investing exclusively in highly liquid assets classes by means of ETFs and individual bonds
  • Historical performance of individual asset classes and their correlations are used as inputs
  • High activity of allocation decisions on a monthly basis
  • The deviation from the benchmark may be significant but is risk-controlled
  • The limitation of downside potential from each historic high is the most important criterion (risk management)