Time is Right for GAA
Many institutions rely on strategic asset allocation to maximize their risk-adjusted returns. However, the inherent long-term focus of many such allocations may cause investors to miss near-term market opportunities. This weakness can be addressed by making a strategic allocation to a global asset allocation (GAA) strategy. Our primary focus as a GAA manager is to identify and act on opportunities by moving quickly to protect capital and to capture market upside as cycles develop. This inherently provides timing diversification to portfolios that are typically more focused on long-term strategic asset allocation.
Our Success Record
Balentine aims to help institutions achieve outperformance through asset class selection, not security selection. Studies* show, on average, that asset allocation accounts for 100% of the level of returns over time. We are nimble in our ability to tactically shift in and out of asset classes as market cycles change. With a 30-year demonstrated track record, consultants can rest assured our record of success is not an investment fad or anomaly.
*Source: Ibbotson, Roger G. and Paul D. Kaplan. “Does Asset Allocation Policy Explain 40, 90 or 100 Percent of Performance?” Financial Analysts Journal, Jan/Feb 2000, pp. 26-33.
Limit Downside Risk in Difficult Markets
GAA strategies are designed to protect capital in down markets and participate in up markets.
We tailor our approach to meet each client’s individualized risk tolerance and regulatory restrictions, as set forth in the investment policy statement (IPS).
Low-cost funds provide an efficient way to implement best ideas across a global opportunity set.
Customized Asset Allocation Solutions
Balentine offers a customized Global Asset Allocation strategy to complement a plan’s strategic asset allocation over multiple market cycles.
Reliable, Model-Driven Approach
Over the past 30 years, our team has honed a disciplined, consistent, and repeatable investment process. The core of our investment process is model-driven and relies on objective inputs. Unlike most humans, investment models recognize the repeatability of patterns. Our models pick up on human psychology, which drives the market. If we insert our biases in the process, we are likely to make the same emotional mistakes as other investors. Balentine’s key insight is asset class performance dispersion unfolds over long periods with great amplitude, creating opportunities in a simple, repeatable way.
Timeless Investment Philosophy
An investment philosophy must be timeless yet repeatable. Our philosophy is grounded in behavioral finance: investors gradually and predictably change emotions over time. The market pushes some asset classes too high on emotions of greed, while pushing other asset classes too low on emotions of fear. Our proprietary models, developed and applied over several market cycles, capture the cycle of emotions through relative value and momentum. Balentine research demonstrates long-lived relationships of returns exist between asset classes and we use these emotional over-reactions to build positions in asset classes that exhibit market confidence and then move out of those positions as market confidence erodes. As long as investors continue to demonstrate behavior driven by fear and greed, there will always be market inefficiencies that our models are designed to capture.
Repeatable Investment Process
The repeatability of our investment process rests on proprietary quantitative models that identify where we are in the market cycle. There are two key tenets that allow our model to do this: 1) attempts to time the exact market bottom or top of each cycle are futile, and 2) return dispersions between asset class pairs are both wide and long-lived. Our models are designed to capitalize on the emotional patterns of other market participants. The models capture the majority of an unfolding cycle and await confirmation that an old cycle has ended before changing the portfolio position.
Proactive, Tactical Strategy
We seek to provide downside protection in sustained bear markets while also participating in bull markets for our institutional clients. Our investment process leads to proactive rebalancing into asset classes that we believe are more likely to outperform and away from asset classes that are decreasing in value. Moreover, we capitalize on tactical opportunities quickly, which benefits investors looking to realize near-term opportunities that may have otherwise been missed. Our Global Asset Allocation (GAA) strategies assesses a global opportunity set utilizing a quantitative investment process to identify near-term opportunities across asset classes. This tactical focus complements a plan’s long-term strategic view.
Here to Help Your Plan
We bring a simple, disciplined, and repeatable process that is model-driven and highly scalable. GAA focuses on relative valuation and momentum to determine which asset classes offer the best risk-adjusted reward. The momentum component of our investment process is very differentiating versus our peers. By utilizing momentum, we avoid value traps and proactively move into asset classes that are poised to outperform.