Strategic Asset Allocation

PPS has developed a proprietary investment screening process using over 25 selection criteria that produces a select few investments. We screen through thousands of mutual funds and exchange traded funds (ETFs), separating funds into specific asset classes. We seek managers that standout from their peers and are disciplined within their appropriate asset class. Keeping this discipline is important in keeping with the proper allocations set forth by our portfolio design. We screen investments daily, but do not reallocate until after they have consistently met our requirements.

Strategic vs. Tactical

There are different management styles, each with their own strengths and weaknesses.

Strategic asset allocation is a base style mix is to target weights, usually at regular intervals such as monthly or quarterly, to maintain a long-term goal for asset allocation. An emphasis is placed on preserving the fixed weights because as history shows, this accounts for the majority of the performance return.

Tactical asset allocation involves actively moving various asset classes within a risk-controlled framework to create an additional source of return. An attempt is made to take advantage of short and intermediate term market inefficiencies as a means of managing investors’ exposure to market risk. This approach can create costly trading expenses and impact performance by trying to time the market.

PPS believes that combining both Strategic and Tactical asset allocation has merit. Each can help to manage risk and when used together can be advantageous.