Quantitative Strategic Asset Allocation (QSAA)
A robust and repeatable quantitative process to determine long term asset allocation targets.
Strategic Allocation and Tactical Triggers
Quantitative Strategic Asset Allocation (QSAA) is a robust and repeatable quantitative process that Stratagemma uses to determine long term Asset Allocation targets. QSAA,utilizing algorithmic, rules based allocation methodologies, combined with extensive data sets, will specifically determine your portfolio diversification requirements across a range of asset classes and risk factors. Our QSAA is designed to incorporate in detail your investment policy and objectives utilizing an extensive list of variables directly related to standard risk and return
metrics, all of which are client definable. The Stratagemma QSAA framework includes extensive OOS (Out of Sample) backtesting to assure that live market performance will meet your
predefined expectations. The QSAA process is based on two main components; Strategic Allocation and Tactical Triggers or as we call them internally the “Base Model and Tactical
Layers” . This extensively tested framework lets us align your risk tolerance with long-term investment objectives while at the same time constantly monitoring market conditions to make
medium term portfolio adjustments when conditions indicate the necessity to do so.
What is QSAA?
QSAA is the process that Stratagemma uses to link long-term asset allocation to long-term investment objectives. We have empirical evidence that clearly demonstrates that the
repeatable QSAA model correctly implemented and executed drives the majority of long-term portfolio returns. By pre-defining a sensible level of investment returns over the long-term, together with the inherent goal of minimising risk, our algorithmic rules based models will deliver the most efficient (least) risk exposure for the desired return. Risk can be quantified in a variety of manners — including portfolio volatility, risk of drawdowns and losses, Value at Risk and CVAR, etc.
Fig 1: The core strategy or “Base Model” is designed to produce the bulk of the portfolio returns over the longer horizon. The Tactical Asset Allocations role is to assess with greater frequency shorter and mid term market conditions and to adjust the portfolio accordingly. The TAA allocation process is aligned with the strategic portfolio objectives and is intended to strengthen, but not deviate from the long term investment policy and risk appetite.
FIG 2: Stratagemma utilizes a robust and repeatable quantitative process to build QSAA.
Why you can rely on the Stratagemma QSAA process?
1) QSAA is a quantitative, repeatable process: QSAA utilizes algorithmically driven processes designed by Stratagemma over the last 8 years and incorporate the latest in academic research.
2) QSAA is a framework for improving portfolio diversification: We consider good diversification to be exposure to a range of risk and return drivers across asset classes and and risk factors. The output is complete transparency and comprehension of your risk exposures.
3) QSAA is the basis and guidance for the TAA (tactical asset allocation) process: Having a clearly defined base model connected to an investment objective provides for a disciplined approach to medium-term changes to portfolio asset allocations.
4) QSAA provides you with the confidence of ample OOS (out of sample) testing to assure that your defined long-term risk tolerance is aligned with long-term investment objectives: The QSAA process includes a clear assessment of long-term risk. Risk includes portfolio volatility, probability of drawdowns, possible drawdowns in extreme scenarios and a variety of other risk metrics.
What are you waiting for?
Contact Cuantserv today and start making more informed investment decisions, better serve your clients precise investment objectives, and create new opportunities for your advisory firm, family office, or wealth management business.