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Discover our Strategic Asset Allocation Tool

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Find your ideal Private Markets Allocation

We are pleased to introduce our Strategic Asset Allocation (SAA) tool, a powerful resource designed to help investors create a balanced portfolio that reflects their individual investment preferences. This tool helps investors visualise the changes in an optimal portfolio as they set their return targets, and also allows investors to see the impact of increasing private market allocations on relevant Key Performance Indicators (KPIs).

We offer a wide range of typical allocations for institutional investors, along with parameters that indicate risk appetite and the desired percentage allocated to private markets. These investor profiles are derived from our extensive client base and we have analysed common allocations to define target return ranges and portfolio management allocations. These include:

  • European pension funds: LDI Light and Total Return
  • Insurance companies
  • Family Offices

In recognition of the growing interest in alternatives and our extensive coverage of this area, we have also included optimal asset allocation within alternatives itself. Here, investors can see how a granular allocation to private market sub-strategies affects return expectations and portfolio characteristics.

You can access the SAA tool here

How to Use the SAA Tool

I . Select a client profile

Investors choose from a range of portfolios typical of institutions and their investment objectives:

II. Select your preferences

After selecting the desired type of client, by adjusting the Expected Return Target via the slider, users can navigate along the efficient frontier. Alternatively, changing the target allocation to Private Markets generates a new frontier, helping investors visualize their asset allocation and identify the marginal benefits of including additional illiquid assets in their existing portfolio.

Investors can visualise the selected optimal allocation dynamically in real time as their preferences are adjusted. The performance of the selected portfolio can be simultaneously monitored.

III. Compare to a Traditional 60/40 Portfolio

Investors can view the expected performance of the selected portfolio and compare it to a traditional 60/40 portfolio. By moving the slider, they can see how the allocation, return and risk profiles of the selected portfolio change. This comparison with the 60/40 portfolio provides a clearer understanding of the impact of their choices. This allows investors to make informed decisions in line with their investment objectives.

Output and Methods

Our tool provides a comprehensive set of outputs covering a range of Key Performance Indicators (KPIs). These KPIs range from expected return and volatility to Sharpe Ratio and Value at Risk (VaR) at a 95% confidence level over a one-year period. This detailed output provides users with an in-depth understanding of how changes in input parameters affect the relevant KPIs.

The calculations performed by our SAA tool are based on the mean-variance optimisation model. This model is a cornerstone of modern portfolio theory and seeks to balance risk and expected return, maximising the latter for a given level of risk. The term 'marginal benefit' refers to the incremental increase in return or reduction in risk that can be achieved by gradually increasing the proportion of a given asset in the portfolio.

In our approach, the optimal portfolio is calculated on an individual basis, taking into account the input parameters chosen by the user. The calculation uses representative industry benchmarks for each asset class, ensuring a realistic and unbiased view of potential portfolio outcomes. This approach ensures that users receive an accurate representation of their potential investment outcomes.

Important Information
This document is informative purposes only. It does not constitute research, investment advice nor solicitation to invest in any investment product or service that Klarphos offers or may offer in the future in any jurisdiction. The information contained herein is based on projections, estimates and/or other financial data and has been prepared internally by Klarphos. Opinions expressed therein are current opinions as of the date of this document only and are subject to change at any time without notice. No representations are made as to the accuracy of the observations, assumptions, and projections. No subscriptions to any Klarphos products are possible based solely on this document. Any investment decisions should be made in accordance with the legal documentation of a fund such as its offering memorandum. Klarphos is not entitled to provide any tax, regulatory or legal advice. Past performance is not indicative of future returns. There can be no assurance that the strategy objectives will be realized or that the strategy will not experience losses. Target returns are hypothetical and are neither guarantees nor predictions of future performance. There can be no assurance that the target returns will be achieved.

May 2024

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