Our portfolios are designed to give investors one-click access to a globally diversified portfolio. Each portfolio is split across a relatively uncorrelated set of asset classes spanning 50 global equity and fixed income markets, each represented by a low-cost ETF.
We start with Modern Portfolio Theory, the Nobel Prize winning theory pioneered by economists Harry Markowitz and William Sharpe, to determine the asset allocation. It is still the most prevalent theory for building diversified portfolios today, but is not without its limitations in the real world. We use the same techniques implemented by the world’s largest asset managers and investment banks to apply this theory to real world investing. Instead of relying on historical asset class returns, we extrapolate them from current market conditions, and use an enhanced method to find the optimal portfolio that maximises long-term return for each given level of risk. We then select an ETF to represent each asset class based on a list of criteria. We start with the entire US domiciled ETF universe and compare attributes that include expense ratio, fund size, and liquidity. We score each fund based on how well they do across the criteria and choose the highest scoring fund within each asset class.
Portfolios are automatically rebalanced at least quarterly. For plans with active salary deferrals, we use incoming cash to keep your portfolios in-line. Our investment committee meets quarterly to review the funds for each asset class, which are replaced in existing portfolios with no transaction costs. The asset allocation of each investment portfolio is updated annually, but we have discretion to change them at any time should market conditions change.