Asset allocation
Beta, alpha, and which one you are paying for
Our view goes beyond standard allocation, and is designed to sit beside it rather than replace it.
Where the standard model of an investment process has failed, there is no longer an alternative to alternative processes.
What the standard model leaves out
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1
Asset classes are not the unit of decision
A portfolio structured by asset class holds a set of labels rather than a set of exposures. The label moves less often than the exposure it is standing in for, which is how a structure comes to look stable while the risk inside it changes.
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2
Correlation is assumed rather than watched
Diversification that rests on a historical correlation is a bet that the relationship holds. Central-bank intervention and volatility regimes break those relationships precisely when the diversification is being relied on.
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3
A theme has a date; an asset class does not
A thematic exposure states when it expects to be right and what would show that it is not. That is a testable claim, and it is the reason a thematic process can be reviewed rather than merely reported.
In the midst of chaos, there is also opportunity.