Global Tactical Asset Allocation Strategy

By M. Isi Eromosele

Global Tactical Asset Allocation (GTAA) is an actively managed, multi-asset class strategy designed to produce alpha from a top-down investment discipline. The strategy features:

• A global approach incorporating asset class, country, sector and currency opportunities
• A combination of quantitative techniques and fundamental analysis

Focus On Asset Allocation

Institutions primarily have focused on generating alpha from bottom-up security selection strategies, relying on a process that attempts to select the best managers within each broad asset category.

However, this approach fails to capitalize on the ability to add alpha by tactically allocating between asset categories, which can provide significant benefits. GTAA seeks to harvest this source of alpha, which is often ignored by institutional investors.

GTAA differs from traditional “bottom-up” approaches, because it seeks to derive its source of out performance from macro or “top-down” decisions. Whereas bottom-up managers must decide which individual securities to overweight and underweight, a GTAA manager would have to decide which country indexes to overweight and underweight.

Other types of macro decisions may involve broad asset classes (global stocks and bonds), regions/countries within global stocks and bonds, currencies, as well as sectors. This top-down distinction means that GTAA managers are not looking for inefficiencies between securities, but rather inefficiencies between entire markets and regions.

Maximizing Investment Opportunities

Unlike most traditional domestic asset allocation strategies that make one allocation decision of equities relative to bonds, GTAA strategy exploits a broader set of investment opportunities.

Expanding the investment universe from domestic to global increases the opportunities to identify and exploit inefficiencies, in order to generate alpha. Global Tactical Asset Allocation expands the traditional investment opportunity set and seeks sources of alpha that are differentiated from bottom-up managers.

Team-oriented Approach to Investing

The Global Asset Allocation team generates original investment research and asset allocation views and implements a customized strategy for each client, depending on their unique requirements.

Investment and Research Teams are responsible for producing investment analytics and making asset allocation decisions across asset classes, markets, sectors, and currencies. The investment team works closely with the Research team in the analysis and development of views.

Portfolio Management Team is responsible for reflecting the ideas and research generated by the Investment and Research Team in the individual client portfolios, subject to specific client guidelines.

Trading Team is responsible for executing trading activities in the cash and synthetic markets according to investment decisions.

Top Down Analysis

The Global Tactical Asset Allocation investment process follows a hierarchy of decision-making. First, the relative attractiveness of global asset classes is assessed. Within each asset class (stocks, bonds), the relative attractiveness of regions and countries is evaluated.

For select equity and fixed income regions, assessments re occasionally made regarding style (e.g. size, duration). The relative attractiveness of currencies are also evaluated. Finally, for portfolios that allow utilization alternative investments, opportunistic assets such as high yield, gold and oil are evaluated.

Investment views are the result of rigorous fundamental research and analysis conducted internally by team members. The inputs to the process include macroeconomic, market and aggregates, and sector/company data.

A flexible approach is used that employs both quantitative and qualitative techniques, allowing for the evaluation of a comprehensive set of information and development of appropriate investment views. This flexible approach has been central to our success and distinguishes us from traditionally quantitative methods.

At each level of the decision hierarchy, the Asset Allocation Team utilizes a variety of quantitative and qualitative measures to determine the relative attractiveness of global asset classes, markets, sectors and styles. Our analysis is based on a strict adherence to a three-pronged assessment of valuations, dynamics and technicals.

M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance

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