Wealth Management Solutions
Asset Allocation and Portfolio Management

We use modern finance techniques to help manage our clients portfolios. Numerous studies have shown that over 90% of investor returns are from proper asset allocation asset classes. Our portfolios are designed to match our client's tolerance for risk, tax situation and investment time horizon.

The first tenet we adhere to is the efficient frontier theory. The efficient frontier is a theory that considers a universe of risky investments and explores what might be an optimal portfolio based upon those possible investments. We assign a correlation to each pair of returns and we use these inputs to calculate the expected return and volatility (risk) portfolio that can be constructed using the instruments that comprise the universe.

The notion of "optimal" portfolio can be defined in one of two ways:

1. For any level of volatility (risk), we can select the one which has the highest expected return.

2. For any expected return, we can select the one which has the lowest volatility (risk).

Typically, the portfolios which comprise the efficient frontier are the ones which are most highly diversified. Less diversified portfolios tend to be less efficient.

The objective of portfolio management is to find the optimal portfolio for a client. Such a portfolio should have two characteristics:

A) It should lie on the efficient frontier; and

B) It should have no more risk than our client is willing to incur.

A second key tenet of modern finance is the Capital Asset Pricing Model (CAPM). Whereas the efficient portfolio theory is concerned solely with risky assets, investors have the ability to invest in a risk free asset. CAPM decomposes a portfolio's risk into systematic and specific risk.

Systematic risk is the risk of holding the market portfolio. As the market moves, each individual asset is more or less affected. To the extent that any asset participates in such general market moves, that asset entails systematic risk.

Specific risk is the risk which is unique to an individual asset. It represents the component of an asset's return which is uncorrelated with general market moves.

According to CAPM, the marketplace compensates investors for taking systematic risk but not for taking specific risk. This is because specific risk can be diversified away. When an investor holds the market portfolio, each individual asset in that portfolio entails specific risk, but through diversification, the investor's net exposure is just the systematic risk of the market portfolio.

Our job is to help our clients to achieve the proper diversification to establish the most efficient portfolio by using the best uncorrelated asset classes .


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