This is a summary of a session from the Money Management Institute’s 2013 Spring Convention. The panel was made up of three experts all from large, institutional asset management firms:
- Daniel Loewy, Co-Chief Investment Officer, AllianceBernstein
- Donald Plotsky, Head of Product Group, Western Asset Management
- Robert McConnaughey, Head of Equity, Columbia Management
The session moderator was Kevin Keefe, Executive VP, Advisor Group.
Can you discuss some of your methodologies around asset allocation and portfolio construction?
According to Plotsky, a lot of clients are worried that fixed income is no longer a viable investment. He and his firm reject that notion and believe that investors need to re-think their approach to asset allocation. Income is a critical component of any long-term investment program, he stressed.
Loewy believes that there are three keys to successful asset allocation:
- pro-active – long-term assumptions about strategic asset allocation doesn’t cut it anymore, must have a pro-active approach to keep clients in the game to capture long-term risk premium
- flexibility – traditionally, risk was managed from the bottom-up using individual portfolio sub-components, investors want to manage absolute risk, not relative risk, requires a more flexible approach to be able to take advantage of opportunities
- customization – there is no one-size fits all portfolio, need to focus on individual outcomes such as growth, income, real return or capital preservation