Resources - Asset Allocation Importance

Industry studies confirm that portfolio’s asset allocation strategy contributes over 90% to the portfolio performance, making it the primary driver to investment success.

To this end, Legacy performs an in-depth asset allocation study for every client ensuring that the investment approach eventually used has been well researched and is appropriate for meeting your goals and objectives.

Source: Brinson, Singer, and Beebower, "Determinants of Portfolio Performance." Financial Analyst Journal, May/June 1991.

Hierarchy of Allocation Decision Making

From most important to less important

  • What is the length of time that the portfolio can be committed to a specific investment policy?
  • What asset classes will be considered for investment?
  • What percent of the portfolio will be invested in each asset class?
  • Within each specific asset class, what strategies or styles will be used?
  • Which managers will be selected to manage each style or strategy?

Allocating Assets

  • Begins with a deep understanding for the purpose of the funds.
  • An in-depth, quantitative asset allocation study must be done.
  • A risk posture assessment will be the cornerstone of that study.
  • Spending policies and capital needs must be understood and considered.
  • Specific asset classes and styles are determined.
  • Rebalancing parameters are established.