Global tactical asset allocation strategy targets lower risk and better returns
Global Asset Investment Strategies (GAInS) is an investment platform that combines the benefits of balanced, globally-diversified portfolios with a proprietary tactical asset allocation strategy. Each GAInS portfolio aims to provide superior, lower-risk returns suitable for a wide range of Canadian- or US-dollar-based investors.

The GAInS platform was founded in 2004 by Kenneth Mulders, CFA. Mr. Mulders, Vice-President of R.N. Croft Financial Group Inc., continues to manage the GAInS portfolios and to develop enhanced investment strategies for Croft clients.

Balanced and globally diversified portfolios reduce risk

Historically, high-quality fixed-income investments (bonds, Treasury bills, etc. – not derivatives or repackaged versions of these products) have provided lower risk – defined as risk of loss of principal – and more consistent, if lower, returns than most other asset classes. Likewise, equity investments (stocks) have provided higher returns over the long term, combined with significantly higher risk.

Balanced investment portfolios vary the proportion of fixed-income investments, for income and preservation of capital, and equities, for longer-term growth. While the returns of such balanced portfolios should be optimized for the home currency of the investor, prudent global diversification of the portfolio’s investments can increase both the consistency of returns and the exposure to higher-growth markets.

Tactical asset allocation adjusts to market conditions

The most common method of balanced portfolio construction – strategic asset allocation – allocates fixed proportions of fixed income and equity assets based on the investor’s individual income needs, time horizon, and risk tolerance. The assets are rebalanced “back to mandate” at regular intervals (usually annually) or adjusted slowly over time to accommodate changes to the investor’s individual circumstances.

The advantages of strategic asset allocation include consistent risk profiles and returns for more conservative portfolios, combined with lower management and trading costs. Disadvantages include the lack of flexibility to adjust to rapidly changing market circumstances and opportunities.

To take maximum advantage of current market conditions, a manager can choose to adopt a tactical asset allocation strategy, which may adjust the fixed-income versus equities weights at regular intervals. For example, if the tactical manager believes that equities would outperform fixed income over the next period – which could be a month, a quarter, six months, or even a year – the manager would adjust the balance of the portfolio to overweight equities and underweight bonds.

All GAInS portfolios first assign a balance of fixed-income and equity assets appropriate to each investor’s individual risk/return profile. Each month thereafter, we may rebalance the portfolio within fixed ranges using our proprietary tactical asset allocation strategy, which compares the recent performance of each asset class used. The advantages of the GAInS tactical asset allocation strategy include better alignment of each portfolio to current market conditions, with the objective of achieving better returns than strategically-balanced portfolios with similar levels of risk. Disadvantages include higher trading and management costs, which may not be offset by higher growth opportunities.

During more volatile market conditions GAInS also adjusts the portfolio strategy of more aggressive investors to follow a more conservative tactical asset allocation profile. By adopting more balanced or conservative strategies during appropriate points of the market cycle our aim is both to mitigate risk and, through preservation of previous capital gains, increase returns.
 


To find our more about the GAInS Portfolios please email kmulders@croftgroup.com.