Asset Allocation Process
TIAI utilizes a tactical asset allocation model as a risk/return management tool.
- The basic premise behind the model is to maximize return and minimize risk through the use of low correlating assets.
- Combinations of these assets are modeled by risk tolerances and constraints based on historical standard deviations, current risk premiums and projected (expected) returns.
Within each portfolio, TIAI may shift assets away from the neutral weighting of the portfolio (overweighting and underweighting certain asset classes relative to the benchmark) to seek to benefit from these changing market conditions.
TIAI’s asset allocation process consists of:
- An initial quantitative step of mean variance optimization based on Modern Portfolio Theory, and
- A qualitative overlay that is added to this process in which current economic and market conditions are analyzed for confirmation of results from the quantitative analysis.
Specifically, this includes technical and fundamental analysis of all asset classes and capital markets including, but not limited to: interest rate levels, price and relative strength trends, historical probabilities and economic conditions.