Building Robust Investment Portfolios
High Level Overview of the SCS Asset Allocation Framework
Target an Appropriate Allocation to Safety Net Assets
Such as cash and high-quality core bonds, which aim to provide the portfolio a margin of safety, along with a reliable source of liquidity (e.g., spending, capital calls, and other expenditures).
Identify the Highest Opportunity Investments
Which tend to be private investments and special situations due to the embedded illiquidity premium.
The goal is to harvest these premiums within the limits of one’s illiquidity tolerance.
Spread Balance Amongst Independent Mix of Liquid Assets
The balance of the risk budget is spread amongst independent return streams across credit, absolute return, and public equity, while providing a secondary source of liquidity.
Target Optimal Position Sizing
Individual managers are sized according to a defined set of criteria such as the relative attractiveness and complementary nature of the potential return profile.
We have adopted and refined our asset allocation framework because we find it to be a practical, time-tested, flexible approach for responsibly managing our clients’ money. You can take comfort in the fact that some of the brightest investment minds and most successful practitioners in the industry have adopted this same framework. In summary: