Whitepaper - June 2018

A Tactical Asset Allocation Workflow

Long-term investors often passively track a strategic asset allocation benchmark whose weights across the various asset classes remains constant over a multi-year horizon (usually 10, 15 years, or longer). Specialist teams, internal or external, may be setup to add an active overlay portfolio in the form of a tactical asset allocation that deviates from the strategic benchmark over shorter time horizons. These programs are used to either de-risk the strategic portfolio in times of market stress, or to add alpha by aligning the portfolio with the economic cycle over shorter time periods (i.e. usually three to five years).

In this paper we recount the quarterly tactical asset allocation process of a fictional US pension fund (“the Fund”) during the period of September 30th 2016 through to March 30th 2018.


Olivier d'Assier

Managing Director, Applied Research - APAC