Strategic Asset Allocation Process Where Their Objectives Are Target Return and Minimize Expected Shortfall
Strategic Asset Allocation Process Where Their Objectives Are Target Return and Minimize Expected Shortfall
The Client Profile generated in Nebo forms the core of Heximer’s Investment Policy Statement. It consists of:
- a reasonable target long-term average return that, if achieved, would accomplish the client’s goals (Return Profile)
- a set of constraints that account for short-term loss aversion (Risk Profile)
When engaging with clients, John focuses on the client's required return – what Nebo calls the Target Compound Return (TCR) – to tie everything together, from spending, savings, and goals, all the way to the portfolio. As John aptly said, the "TCR is the bridge."
Nebo integrates Heximer's financial planning workflow into the portfolio construction process so that each client gets a personalized portfolio aligned with their financial plan that seeks to minimize the risk that they do not have the financial resources they need when they need them.
Heximer builds personalized glidepaths based on each client's unique needs and circumstances and actively adjusts to changing client and market conditions. These glidepaths are used to assess the viability of the Battle Plan and help John offer clients meaningful choices based on tradeoffs between the long-term and short-term. Nebo's next-generation Monte Carlo simulations also correct for flaws in the standard random walk model found in most financial planning tools.
Systematize a valuation-sensitive investment process while preserving Heximer's framework and philosophy
Systematize a valuation-sensitive investment process while preserving Heximer's framework and philosophy
While preserving Heximer’s investment framework and philosophy, Nebo simplified and clarified their portfolio structure to improve the robustness of their optimization. Three of these new building blocks tactically adjust internal allocations based on valuation. The global equity strategy weights regions (US, EAFE, and EM) and styles within a region (Value, Quality, Small, etc.), the Global Credit strategy adjusts weights between US High Yield and EM Debt, with US BB Bonds as ballast, and a Real Asset strategy that adjusts allocations to Real Estate, Resource and Infrastructure Equities, TIPs, and Commodities.
Streamline Trading & Rebalancing for Personalized Portfolios
As the Portfolio Manager, Brandon expresses his capital market assumptions in Nebo for each portfolio building block. He uses the "GMO View" as a reference point but blends it with other perspectives to generate his take on the market. These views flow through to the Monte Carlo simulations and the portfolio construction that drives the current portfolio.
Streamline Trading & Rebalancing for Personalized Portfolios
With critical support and insight from John and Brandon, we integrated with Orion's rebalancer (Eclipse), resulting in streamlined trading and rebalancing so that, with a click of a button, each client gets a dynamic, personalized portfolio constructed in real time. Furthermore, Nebo's architecture allows Heximer to rebalance portfolio building blocks across all clients efficiently. This allows high-level allocations to stocks and bonds to change at a different rate than the allocations to, say, US Value, Intl Value, etc., allowing for alpha opportunities at various levels in the portfolio.
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