Dynamic Asset Allocation Strategy

Very Hard Asset Allocation Asset Allocation Implementation

John is a portfolio manager at a wealth management firm. He is tasked with constructing a multi-asset portfolio for a high-net-worth client who has an aggressive risk tolerance and aims for capital appreciation over a long investment horizon. The client has provided specific requests that include a significant allocation to international equities, private equity exposure, and minimal fixed income investments.

As John is developing the asset allocation strategy, he considers the implications of implementing the allocations across various investment vehicles and the potential for manager selection risk. He is particularly concerned about optimizing the portfolio's expected return while managing the downside risk related to market volatility and liquidity constraints inspired by private equity investments.

Given these considerations, which of the following approaches would best help John achieve a well-implemented asset allocation that aligns with the client’s objectives?

Utilize a core-satellite investment strategy that focuses on selecting high-performing active managers for the equity components while keeping a passive approach for fixed income.

Adopt an absolute return strategy that commits to maintaining specific levels of liquidity across all asset classes.

Implement a dynamic asset allocation approach that periodically rebalances towards optimal allocations based on recent performance and volatility projections.

Hint

Submitted3.3K

Correct2.8K

% Correct85%