Understanding Strategic Asset Allocation in Portfolio Management

Hard Asset Allocation Strategic Asset Allocation

James is a seasoned portfolio manager responsible for a high-net-worth client's investment strategy. The client has a long-term investment horizon of 15 years and emphasizes maintaining a balanced risk-return profile while achieving moderate capital growth. James believes that strategic asset allocation is the most effective approach for this client's portfolio considering the current economic environment characterized by moderate growth and low inflation.

In the context of James' responsibility, he considers incorporating a tactical over-weight to equities for the next couple of years, anticipating a rebound in global markets. Given this context, which of the following statements accurately reflects the implications of strategic asset allocation and its application for James' strategy?

Strategic asset allocation focuses primarily on short-term market movements and favors frequent rebalancing to capture immediate opportunities.

Strategic asset allocation aims to maintain a long-term target allocation to asset classes, while allowing for tactical adjustments based on market conditions.

Strategic asset allocation is primarily concerned with maximizing returns without regard for the client's risk tolerance or investment horizon.

Hint

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