which tries to establish whether an asset class is either cheap or expensive . The second is the macrocycle , which may either present a headwind or a tailwind for the asset class . Lastly , we consider price action through an awareness of prevailing trends and momentum conditions .
Most of the value-add over time tends to come from holding an appropriate long-term asset class mix rather than from shifting in and out of asset classes , so we try to limit the frequency of tactical tilts . It is also useful to establish pre-determined ranges which dictate how far a portfolio may deviate from its long-term strategic asset allocation . These conditions help one focus on getting the big calls right and managing the impact of potentially making a mistake .
Disclaimer : Kindly note that this does not constitute financial advice . The information provided is purely informational . The information , opinions and communication from the PPS Group or any of its subsidiaries , whether written , oral or implied , are expressed in good faith and not intended as investment advice , neither do they constitute an offer nor solicitation in any manner .
Portfolio construction is not just about asset allocation ; the quality of a multi-managed solution is also very much dependent on the quality of its components , which are the underlying managers . Given that hundreds of unit trust funds are available to choose from , it is important to have a structured approach to identifying promising managers and strategies . This is an essential skill for a multi-manager ; therefore , we spend a significant amount of time understanding the universe .
There are two sides to any manager research process : quantitative ( which considers returns , numerical and statistical data ) and qualitative ( information about the respective manager , such as its business , people and investment approach ). It then becomes a question of whether the strategy stands out and whether conditions are right for the strategy to repeat its success going forward .
Portfolios can be constructed in many ways , but most important is understanding the risks embedded in an approach . Sticking to a well-thought-out framework and following a disciplined approach is ultimately important and will bring about consistency in return outcomes . The long-term nature of investing means that any approach to portfolio construction needs time , patience and deliberate action to reap the rewards .
Reza Hendrickse
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