Optimal Asset Allocation Implementation for Portfolio Management

Alyssa is a senior portfolio manager at a wealth management firm. She is currently overseeing a client's portfolio that consists of various asset classes including equities, fixed income, and alternatives. The client has a risk tolerance that allows for a moderate level of risk-taking, seeking a balance between growth and capital preservation.

To implement an asset allocation strategy for this client, Alyssa is considering u\sing a combination of strategic and tactical asset allocation. She wants to allocate 60% of the portfolio to equities, with 40% in developed markets and 20% in emerging markets. The fixed income portion will account for 30% of the portfolio, primarily composed of investment-grade bonds. The remaining 10% is designated for alternatives, including select hedge funds.

As market conditions begin to shift, Alyssa observes that while global economic indicators suggest stability, certain emerging markets are experiencing volatility due to political uncertainties. She must decide whether to maintain her tactical flexibility in reallocating assets based on these evolving market conditions or to adhere strictly to her initial strategic allocation plan.

Given Alyssa's situation, which implementation approach should she prioritize to best manage the portfolio's risk and return characteristics?