Optimal Asset Allocation Strategy for International Equities

Hard Asset Allocation Asset Allocation Implementation

Emily is a chartered financial analyst managing a diversified investment portfolio for a high-net-worth client. Recently, the client expressed a desire to increase their exposure to international equities due to favorable economic conditions abroad, while simultaneously seeking to reduce their allocation to fixed-income securities. Emily is analyzing the implications of this request on the portfolio's overall risk and expected return.

As she considers various asset allocation strategies, she evaluates the impact of these adjustments on the portfolio's expected Sharpe ratio and standard deviation. Given current market conditions and the correlation between asset classes, Emily must decide how to effectively implement the increased allocation to international equities while minimizing unwanted risk.

What should Emily prioritize in her asset allocation implementation strategy to meet her client's objectives while maintaining overall portfolio sustainability?

Utilize a tactical asset allocation strategy that allows for frequent rebalancing based on short-term market trends.

Adopt a strategic asset allocation approach by reallocating assets gradually over time to balance risk and return.

Invest heavily in high-risk international growth stocks to maximize potential returns from foreign markets.

Hint

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