Our Typical Multi-Dimensional Portfolio Selection Criteria

Sales representatives usually sell funds based solely on the funds performance and many new investors only consider performance when choosing investment funds. A detailed fund selection process involves far more than the above two dimensional viewpoint and at Aall STAR Asset Management we use a broad multi-dimensional approach.

 

Image 1: This can vary depending on the fund being scrutinised

 

Asset Allocation

What percentage are we going to allocate to each fund/asset class in order to achieve a well balanced risk-adjusted portfolio?

Within Aall STAR Asset Management we run a series of “Efficient Frontier Curves” (EFC) with an aim to construct a portfolio with the highest risk adjusted rates of returns (optimal allocation) whilst complying with the investors stated risk tolerance levels. This is a mathematical process which compares how much of a particular fund should be allocated to the investors portfolio.

 

Image 2: The above Efficient Frontier Curve is only a sample

 

An EFC curve will plot a number of different portfolio options, showing the risk to reward ratios. From this, we can select a portfolio that adheres to the investors stated return and volatility preferences.

The result will be a portfolio that is optimised for the highest risk adjusted rates of return and one which is also constructed from funds that represent the “Best of Breed” from each asset class.