investment strategy - asset allocation 20160204
TRANSCRIPT
Data: the raw material of data science. Better data leads to better estimates.
Our process begins with collection of data from across the globe including: Fundamental Data: Underlying financial
condition of companies Macroeconomic Data: The overall health of
the economy Sentiment Data: The general attitude of
investors and the media Financial Data: Price and volume data
generated from market action Technical Data: Pattern recognition and
indicators from financial data
Naismith Wealth Management | 2626 N Lakeview Avenue #307 |Chicago, Illinois 60614 | 312.757.4547 | www.naismithwealth.com
Big Data Risk & Return
Regardless of your market hypothesis, mathematical asset allocation requires...
...estimates of expected rates of return, risk, and asset similarity. In most financial models, these estimates are 'naive' forecasts meaning historical performance is assumed to be the same going into the future. This is similar to investing while looking in the rear-view mirror. We seek to improve on naive forecasting by conditioning return and risk estimates on preemptive indicators of performance. This allows us to better position portfolios for changing market environments.
From passive to active, we provide investment strategies that align with your
personal point-of-view on how the markets work.
Personalized Portfolio
Construction Using Advanced
Mathematical Optimization
For all investment strategies, your personal risk tolerance, time horizon, tax sensitivity, and personal needs are always taken into consideration.
Human + Machine Learning: We
leverage the best of both minds. We deploy machine learning algorithms such as adaptive boosting with
trees, random forests, and support vector machines, to identify
relationships in our historical datasets with hundreds of thousands of
explanatory variables. The machines learn how to identify the optimal
expected rate of return for each asset class. Through rolling window,
out-of-sample back-testing, we understand the precision of our
machines and know what behavior is within the range of expectations.
Note that the information provided is not intended to give any specific advice nor an offer to purchase or sell any securities. It purpose is for informational purposes only. Please remember that past performance may not
be indicative of future results. Information pertaining to Naismith Wealth Management operations, services and fees is set forth in our current disclosure statement, Form ADV Part 2A and 2B. A copy of which is available
at www.naismithwealth.com under Important Disclosure. ©2016 Naismith Wealth Management LLC, All Rights Reserved
Global Optimization
Global optimization identifies the portfolios which maximize the risk/return trade-off.
Our optimal estimates of expected rates of return, risk, and asset relationship are inputs into our global optimization algorithms. Custom routines give us the flexibility to identify the portfolio that will maximize your expected return for your level of risk tolerance. This portfolio is traditionally called the optimal portfolio which lies on the efficient frontier.
Investment Strategies
Building on tactical asset allocation, we loosen the constraints on allocation range and
place more weight on the forecasts produced by our predictive analytic models. The goal
is to outperform SAA and TAA by continually positioning the portfolio for what is likely to
happen looking ahead. Your portfolio's calculated risk will always be equal to or less than
your personal risk tolerance level. DAA is typically implemented using low cost exchange
traded funds.
Building on strategic asset allocation, we factor in multiple market forecasts from our
internal predictive analytic models. We then tactically adjust allocation size within a
predetermined range around the strategic allocations with the goal of outperforming the
base policy mix. Additionally, periodic rebalancing is performed when allocations drift
outside their predetermined allocations. This strategy can be implemented using either
passive or active funds.
Using historical long-term expected rates of return, risk, and correlation, we create a
diversified portfolio across equities, bonds, real estate, commodities, and alternative,
both domestic and international. Your portfolio is rebalanced when allocations drift
outside predefined bounds or when there are changes in your time horizon, risk
tolerance, tax sensitivity, and/or personal needs. Strategic Asset Allocation can be
implemented using either passive or active funds.
Strategic Asset Allocation
Tactical Asset Allocation
Dynamic Asset Allocation