Multi Strategy Asset Allocation (MSAA) - New Concepts for Institutional Asset Management Part 1 – A Primer on MSAA
16 Pages Posted: 22 Dec 2011
Date Written: Dezember 22, 2011
Abstract
In the aftermath of the recent financial crisis, institutional investors, especially in Europe, who use traditional asset allocation concepts (e.g. 60% stocks, 40% bonds) are pushed to limits that challenge their ability to achieve a sustainable return to cover their liabilities. Facing tight risk budgets as well as volatile financial markets, they are looking for concepts that will enable them to generate sufficient long-term returns. This article introduces a new concept called Multi Strategy Asset Allocation (MSAA). MSAA deals with the strategic and tactical asset allocation of multiple investment strategies with differing degrees of complexity within one or more asset classes. By diversifying the portfolio over several uncorrelated investment strategies, portfolio managers and asset classes, MSAA creates an asymmetric return profile that enables investors to preserve or build up a sufficient risk budget, so that they are able to invest in a variety of risky assets at any point in time. This in turn should lead to a sustainable stream of returns, sufficient to serve their liabilities.
Keywords: Asset Management, Asset Allocation, Absolute Return, Hedge Fund, Private Equity, Multi-Asset, Multi-Strategy, Asymmetric Returns
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