Modern Asset Allocation for Wealth Management

Informationen zum Autor DAVID M. BERNS, PHD, is the Chief Investment Officer and cofounder of Simplify ETFs where he leads the development of novel investment strategies that help advisors produce better outcomes for their clients. David began his finance career at a $5 billion multi-family office where he developed cutting-edge asset allocation, portfolio management, and risk management systems for managing private and institutional wealth across both liquid and illiquid asset classes. David then pivoted to developing short- and intermediate-term investment strategies that, once layered on top of a client's long-term strategic asset allocation, improve both return and risk metrics. David is also the founder and inventor of Portfolio Designer, a cloud-based asset allocation platform empowering advisors to reclaim the asset allocation component of their fiduciary responsibility. David has a PhD in Physics from the Massachusetts Institute of Technology in the field of Quantum Computation and currently lives in New York City with his wife Carolee and son Henry. Klappentext An authoritative resource for the wealth management industry that bridges the gap between modern perspectives on asset allocation and practical implementation An advanced yet practical dive into the world of asset allocation , Modern Asset Allocation for Wealth Management provides the knowledge financial advisors and their robo-advisor counterparts need to reclaim ownership of the asset allocation component of their fiduciary responsibility. Wealth management practitioners are commonly taught the traditional mean-variance approach in CFA and similar curricula, a method with increasingly limited applicability given the evolution of investment products and our understanding of real-world client preferences. Additionally, financial advisors and researchers typically receive little to no training on how to implement a robust asset allocation framework, a conceptually simple yet practically very challenging task. This timely book offers professional wealth managers and researchers an up-to-date and implementable toolset for managing client portfolios.  The information presented in this book far exceeds the basic models and heuristics most commonly used today, presenting advances in asset allocation that have been isolated to academic and institutional portfolio management settings until now, while simultaneously providing a clear framework that advisors can immediately deploy. This rigorous manuscript covers all aspects of creating client portfolios: setting client risk preferences, deciding which assets to include in the portfolio mix, forecasting future asset performance, and running an optimization to set a final allocation. An important resource for all wealth management fiduciaries, this book enables readers to: Implement a rigorous yet streamlined asset allocation framework that they can stand behind with conviction Deploy both neo-classical and behavioral elements of client preferences to more accurately establish a client risk profile Incorporate client financial goals into the asset allocation process systematically and precisely with a simple balance sheet model Create a systematic framework for justifying which assets should be included in client portfolios Build capital market assumptions from historical data via a statistically sound and intuitive process Run optimization methods that respect complex client preferences and real-world asset characteristics Modern Asset Allocation for Wealth Management is ideal for practicing financial advisors and researchers in both traditional and robo-advisor settings, as well as advanced undergraduate and graduate courses on asset allocation. Zusammenfassung An authoritative resource for the wealth management industry that bridges the gap between modern perspectives on asset allocation and practical implementationAn advanc...

List of contents

Preface vii
 
Acknowledgments xiii
 
Chapter 1 Preliminaries 1
 
Expected Utility 2
 
Introduction 2
 
MPT is an Approximation 5
 
Higher Moment Motivation 8
 
Modernized Preference Motivation 13
 
A Modern Utility Function 15
 
Returns-Based EU Maximization 21
 
Estimation Error 23
 
Introduction 23
 
Minimizing Estimation Error 24
 
Reducing Sensitivity to Estimation Error 28
 
A Modern Definition of Asset Allocation 30
 
Chapter 2 The Client Risk Profile 33
 
Introduction 33
 
Measuring Preferences 34
 
Risk Aversion 34
 
Loss Aversion 39
 
Reflection 41
 
Lottery Question Sizing 43
 
Incorporating Goals 43
 
Preference Moderation via SLR 43
 
Discretionary Wealth 48
 
Comparison with Monte Carlo 51
 
Comparison with Glidepaths 52
 
Chapter 3 Asset Selection 55
 
Introduction 55
 
Moment Contributions 57
 
Overview 57
 
Calculation 59
 
Utility Contribution 62
 
Mimicking Portfolios 63
 
A New Asset Class Paradigm 66
 
Overview 66
 
A Review of Risk Premia 67
 
From Assets to Asset Classes 73
 
Chapter 4 Capital Market Assumptions 79
 
Introduction 79
 
Using History as Our Forecast 81
 
Background 81
 
Estimation Error and Sample Size 83
 
Stationarity: Does History Repeat? 89
 
Adjusting Forecasts 91
 
Pre-Tax Adjustments 91
 
Post-Tax Adjustments 93
 
Chapter 5 Portfolio Optimization 97
 
Introduction 97
 
Optimization Results 98
 
To MPT or Not to MPT? 103
 
Asset Allocation Sensitivity 105
 
Final Remarks 109
 
Bibliography 111
 
Index 113

Product details

• Authors: David Berns, David M Berns, David M. Berns
• Publisher: Wiley, John and Sons Ltd
• Languages: English
• Product format: Hardback
• Released: 31.01.2020
• EAN: 9781119566946
• ISBN: 978-1-119-56694-6
• No. of pages: 144
• Series: Wiley Finance; Wiley Finance Editions
• Subjects: Guides > Law, job, finance; Social sciences, law, business > Business > Business administration; Finanzwesen, vermögensmanagement, Wealth Management, Finance & Investments, Finanz- u. Anlagewesen, Spezialthemen Finanz- u. Anlagewesen, Finance & Investments Special Topics