Yatin Chawla’s Post

Tactical Asset Allocation: Are Advanced Strategies Better? Tactical Asset Allocation (TAA) is an active investment strategy that involves adjusting the allocation of assets in a portfolio to take advantage of short- to medium-term market opportunities. The paper examines five approaches to tactical asset allocation: 1-The SMA 200-day strategy, which uses the price of an asset relative to its 200-day moving average. 2-The SMA Plus strategy, which builds on the SMA 200-day by adding a volatility signal to the trend signal, dynamically adjusting allocations between risky assets and cash. 3-The Dynamic Tactical Asset Allocation (DTAA) strategy, which applies the same trend and volatility signals as SMA Plus but across the entire portfolio, rather than on individual assets. 4-The Risk Parity method, popularized by Ray Dalio’s All Weather Portfolio, equalizes the risk contributions of different asset classes. 5-The Maximum Diversification method, which aims to maximize the diversification ratio by balancing individual asset volatilities against overall portfolio volatility. - The SMA strategy provides strong risk-adjusted returns by shifting to cash during downturns, though it may miss early recovery phases.    - SMA Plus builds on SMA by adding a more dynamic allocation approach, achieving higher returns but at a slightly increased risk level.    - The DTAA strategy yields the highest returns, but experiences significant drawdowns due to aggressive equity exposure and limited risk management. - Risk Parity and Maximum Diversification focus on stability, offering lower returns with minimal volatility, making them suitable for conservative investors.    Reference: Mohamed Aziz Zardi, Quantitative Methods of Dynamic Tactical Asset Allocation, HEC – Faculty of Business and Economics, University of Lausanne, 2024 Join the quant community—subscribe to the newsletter! Link in profile. #stocks #portfoliomanagement #investing ABSTRACT The Simple Moving Average (SMA) 200-day strategy is first investigated, followed by an extended version incorporating a volatility signal, which we name "Simple Moving Average Plus (SMA Plus)". Additionally, we introduce the Dynamic Tactical Asset Allocation (DTAA) strategy, which further builds on these principles. These three signal-based strategies—SMA, SMA Plus, and DTAA—are then compared to dynamic asset allocation methods, namely the Risk Parity (RP) and Maximum Diversification Portfolio (MDP). By using a multi-asset class in the U.S. market, we found that all strategies share a common characteristic of protecting the portfolio during market downturns. Both SMA and SMA Plus strategies provide a good balance between risk and return., whereas the DTAA strategy achieves higher returns, but involves greater risk. As expected, RP and MDP offer risk mitigation, prioritizing stability over higher returns.

In data we analysed recently, we found that 98% of asset managers have unnecessary manual processes. That seems extremely high, is it true? and what is "unnecessary"? Allow me 47 seconds to explain: -- -- Portfolio Managers and Operations both "leverage" investment systems. Their usage can be divided into two types: A. Passive usage, which only applies to Portfolio Managers. This is monitoring portfolios, scanning if there is a need to act on market changes. B. Active usage, which is performing a workflow. For Portfolio managers it can be a rebalancing and for Operations it can be resolving a reconciliation break. -- -- You might have noted that I didn't list the following examples: * Portfolio managers: Scan for when the deposits/redemptions import that failed this morning is resolved * Operations: Perform the actual reconciliation. This is because in an exception-based context, with strong notifications, no user has to perform those tasks. The system does it and alerts a human when they're needed. -- -- In an exception-based setup, active usage declines. The less time you spend in an investment management system, generally the better it is. To recap: 98% of asset managers have unnecessary manual processes. That's a huge financial and opportunity cost

Wealth Management Platform market size is expected to grow at a compound annual growth rate of xx% for the forecast period of 2024 to 2030. Market IntelliX report on Wealth Management Platform market provides analysis and insights regarding the various factors expected to be prevalent throughout the forecasted period while providing their impacts on the market's growth. #WealthManagement #FinTech #InvestmentPlatforms #FinancialPlanning #WealthTech #DigitalWealth #InvestmentManagement #marketanalysis #markettrends  #researchreport #marketreport #marketforecast  #marketgrowth #businessinsights #industryanalysis  #marketoutlook #growthprojections #marketstatistics  #competitiveanalysis #trendanalysis

My paper on lifecycle asset allocation with Aizhan Anarkulova and Michael O'Doherty is now updated to incorporate many, many comments we received (thanks so much to all who gave us feedback). The optimal strategy to invest throughout one's entire life is 33% domestic stocks, 67% international stocks, 0% bonds, and 0% bills. This result comes from utility optimization in our lifecycle asset allocation model with labor income risk, mortality risk, and many other features. The intuition for why our findings differ from others', however, can be captured with a fairly simple mean-variance analysis. Most studies in the lifecycle asset allocation literature consider domestic stocks as the primary risky asset and calibrate to short-term (e.g., monthly) return moments. We also include international stocks and we carefully retain long-term return properties. Let's specialize to risk aversion of four in the figure. In the standard setting (Panel A), the mean-variance weights are about 40% in stocks and 60% in bonds and bills. Including international stocks (Panel B) changes this result to about 75% in stocks (domestic and international) and 25% in bonds. Incorporating long-term return properties (Panels C and D) is also important. Panel D is closest to the setup of our lifecycle model. The optimal mean-variance weights are 99% in stocks (domestic and international) and 1% in bonds and bills. Once we account for long-term return properties, investors would rather diversify with international stocks than bonds and bills. We believe it is of the utmost importance to realistically model the available investments and their long-term returns in lifecycle models. Link to the paper: https://lnkd.in/gmTdX_NB

~100% Equity found efficient for the long run. What's the catch? The catch is, 'it depends' and it's not 100% US stocks either. Scott Cederburg always has very interesting insights to share. It depends on a "high risk aversion coefficient" or low ability/ need to take risk. This is captured accordingly in the charts below. In addition, while over the long-term it might be most efficient to hold 100% equity for optimal returns, over the short-term 'life happens' and can cause investors to require some degree of withdrawal from their investment before the full period is over. This short-term risk is why some allocation to bonds and bills might still be preferred for some investors regardless of the long-term efficiency in returns sacrificed. Now, I must say It has been a pleasure and honor to discuss with and read Scott Cederburg's various responses on the Rational Reminder Community (not to mention his incredible features on RR Podcast episodes 224 and 284!). Can't wait to glean more insights from his research.

ᛈ Penning Capital Management Q2 Performance ᛈ PCM's 2nd Quarter performance numbers are officially out, and despite the market sentiments PCM and it's team outperformed once again. “These events have temporarily disrupted our otherwise well-functioning PCM strategies, causing our market timing to be slightly off and presenting challenges in achieving short-term positive returns. However, it is crucial to remember that this business emphasizes longevity over quick successes. Indeed, it is a marathon, not a sprint. Notably, PCM continues to outperform its benchmarks and, perhaps more significantly, mitigate the volatility observed in other digital asset funds.” - Timothy Hellberg PCM is an open-end fund, providing direct access to the digital asset space, with a unique approach, offering PCM's propreitary SDAPS (Structural Digital Assets Products). If you want to learn more, and how you can get involved, reach out directly or visit: https://lnkd.in/d_hBSU9Y Check back this Friday July 17th, for the release of the full report. Till we yield again /Team Penning Capital Management

As noted from the previous release of this study the general advice seems to have changed from 50% domestic / 50% International for USA based investors with advice for investors in other markets differing to something more akin to the advice in this revised paper. Q1: What has changed in the interpretation of results between the initial release and now? and; Q2: How has the advice for investors in markets other than the USA changed between then and now? (question from Australia) Q3 (for extra credit) is any consideration given to the still ongoing transition from defined benefit pension schemes to market linked defined contribution schemes?

✔ Penning Capital Management (PCM), puts another great quarter in the books! Proud of what me and the team have been able to produce so far in 2024, but even more proud and most of all extremely excited for whats to come during Q3... 🤫 👀 We are seeing a huge addition of new algorithmic systems to the ALPHA portfolio, as well as a more active trading strategy with long exposure to the price of BTC making its way into the BETA portfolio. And that is only the beginning... Full steam ahead! 🚂 #bitcoin #investing #hedgefund #crypto

WEEK 25 TOPIC: 2.5 Practice of Portfolio Management Portfolio construction and rebalancing are integral components of portfolio management, facilitating the creation of diversified investment portfolios aligned with investors' objectives and risk preferences. 2.5.1 Portfolio Construction 1. Asset Allocation - Strategic: Determine the optimal mix of asset classes (e.g., equities, fixed income, cash, alternatives) based on the investor's risk tolerance, investment horizon, and financial goals. - Tactical: Adjust asset allocation dynamically in response to changing market conditions, economic outlooks, and investment opportunities to exploit short-term mispricing and enhance portfolio returns. 2. Security Selection - Fundamental Analysis: Conduct in-depth analysis of individual securities, evaluating factors such as financial performance, industry dynamics, competitive positioning, and valuation metrics to identify undervalued or high-quality investment opportunities. - Technical Analysis: Analyze historical price trends, trading volumes, and market indicators to forecast future price movements and identify entry and exit points for buying and selling securities. 3. Risk Management - Diversification: Spread investment capital across a diverse range of assets, sectors, industries, and geographic regions to reduce portfolio risk and minimize exposure to individual security or sector-specific risks. - Risk Mitigation Strategies: Implement risk mitigation strategies such as hedging, options strategies, and position sizing to manage downside risk, protect capital, and enhance risk-adjusted returns. 4. Environmental, Social, and Governance (ESG) Integration - Incorporate ESG factors into the investment decision-making process to assess the sustainability and ethical impact of investments, aligning portfolio holdings with responsible investing principles and stakeholder values. Portfolio Rebalancing 1. Monitoring Portfolio Allocation and asset class weights - This is to ensure alignment with target asset allocation and investment objectives, identifying deviations that may arise due to market movements or changes in investor circumstances. 2. Rebalancing Triggers or thresholds - based on predetermined tolerances for asset class drift, allocating capital to underweight asset classes and trimming exposure to overweight asset classes to restore the desired asset allocation. 3. Timing and Frequency - Determine the timing and frequency of portfolio rebalancing, considering market volatility, transaction costs, tax implications, and the investor's long-term investment horizon, rebalancing opportunistically or systematically based on predefined criteria. 4. Tax Efficiency 5. Implementation - Execute portfolio rebalancing through a disciplined and systematic process, reallocating capital across asset classes or securities as needed, minimizing market impact, and maintaining portfolio efficiency and liquidity. #portfoliomanagement #portfolio