Our DataDriven Process is a mathematical system we use to create position sizes in the portfolio. Combining math, history and finance, we deliver a super-diversified version of the tangency portfolio. The process provides a precise reason behind each position and its size. Contrary to most asset managers, our allocations are not based on hunches.
We start with market cap and global GDP on the equity side. Larger countries have larger allocations.
Applying Shiller PE and Market Cap to GDP in the valuation process, we overweight cheap countries and underweight expensive ones. Historically, these metrics have high correlations to forward looking returns.
We factor in correlation and volatility to help determine asset class size. We overweight assets with low correlations and underweight assets with high volatility.
Wall Street tends to succumb to an investing flaw called home bias, increasing portfolio risk without increasing expected return.
We take a global approach to portfolio construction, maximizing diversification in an effort to maximize the risk/return tradeoff.