Model Portfolios. One Size Fits All. Bad Bad Idea During Coronacrisis.

The notion of putting retail investors in cookie-cutter mass-produced standardized buckets of allocations, referred to as model portfolios, is remnant of antiquated ‘90s thinking. In 2020, during the coronacrisis it is akin to paying a doctor expensive (very typically over 1% of assets) fees for an over-the-counter pain medicine prescription.

Bespoke allocation goes far beyond conventional passive risk and return trade-off found in model portfolios. It personalizes for unique investor preferences including accommodating a desire or aversion to alternative investments, expressing preferences for desired levels of illiquidity, considering different investing horizons, incorporating time varying risk preferences as well imposing constraints on specific asset classes to reflect unique investor circumstances.

Departing from model portfolios has potential to foster greater transparency. Moreover, it raises the quality of discourse an advisor has with her client. It encourages a conversation not on historical, but around forward looking risk- return expectations. It also brings nuance in investment decision making, conspicuous by absence in model portfolios.

Rather than persist with the historical notion of putting clients in coarse model portfolios, a far better approach is to begin by analyzing the forward-looking statistical properties and expected behavior of a client’s existing portfolio. This helps to arrive at the best combination of asset sub-types that improve existing allocations on a variety of chosen metrics.

ActiveAllocator.com lets you create bespoke portfolios in 10 clicks, in 10 minutes and at 1/10th cost.

ActiveAllocator is a digital asset allocation platform with technology-enabled customized advice capabilities. It is the world’s first portal that seamlessly integrates traditional, illiquid and alternative investments within portfolios. It helps investors analyze existing allocations, discover inefficiencies and create bespoke portfolios in minutes.

 

Instant Multi-Asset Portfolio Diagnosis

ActiveAllocator’s proprietary technology now enables multi-asset portfolio diagnosis in less than three minutes.

New proprietary methodology and scalable technology searches, recognizes, classifies and instantly maps more than four million financial instruments to fifty asset sub-classes to improve strategic asset allocation and portfolio construction.

The movement to multi-asset investing is a dominant trend. This allows investors to quickly analyze and invest their capital in the full panoply of assets that exist today: public securities, private securities, commodities, real estate and other hard assets, loans, leases, insurance and other types of contingent claims and intellectual property.

Traditionally, each of these classes of assets and fund products have been the province of a different manager at a distinct shop. A firm either ran a hedge fund that held predominantly public securities, a private equity fund that acquired control or strategic positions in businesses, a commodity pool that traded commodities futures, or a real estate fund that invested in real property. Often, clients own their assets in different firms and have no way of knowing what their expected portfolio characteristics are likely to be. Now, they can.

Everything changes with ActiveAllocator.com

 

WireHouse ‘Model Portfolios’​ are Inefficient and Sub-optimal

Tens of thousands of Financial Advisors blindly trust an investment committee’s house view and place Trillions of $ of client money in so called ‘model portfolios’. At ActiveAllocator, we analyzed and modeled many firms’ published views using their own long term Strategic Asset Class assumptions. We can now quantitatively demonstrate that such allocations are flat out wrong – this is bad advice.

Trust but verify.

Best of all, any Financial Advisor can now do this on her own in minutes at ActiveAllocator.

Better Financial Advice.