Since the adoption of ERISA, qualified plan fiduciaries and other institutional investors have been compelled to take the notion of diversification to incorporate asset allocation. This basic principle rests on the theory that individual asset classes can be combined to create an optimal portfolio - one that reduces the risk for any given level of return or, conversely, increases the return for any given level of risk.

Today, we know the asset allocation decision is by far the most important judgment any investor will make. Various studies and practical experience have found this factor to contribute up to 95% of a portfolio's return. Security selection, market timing and other elements make up the remainder. So, instead of asking for the right security at the right time, institutional investors must concentrate on the proper mix of asset classes.

At Strategies, LLC, we conduct asset allocation studies in a very detailed manner. We first evaluate a portfolio or plan option lineup based on the risk and return requirements, time horizon, demographic complexities, and other associated constraints. We then propose optimal asset allocation strategies against the backdrop of the capital markets. These studies include items such as historical or projected returns, volitility, best and worst case scenarios within a given confidence level, correlation coefficients, sensitivity analysis and on and on.

In summary, asset allocation is not something fiduciaries and their plan participants or beneficiaries can choose to do or avoid. Either they will proactively decide upon an asset allocation specific to their situation or the collective activities of their money managers will determine one by default. The services of Strategies, LLC are designed to select the former rather than the latter.