Lumen’s portfolio construction and asset allocation process starts with helping investors to clearly define their investment objectives, which can be mapped to a Predefined (Model) Universe, built up by factors that align with the investment strategies and investor’s goal.
The end of a historical bond market rally will bring about yields normalization with considerable implication in the financial landscape. Active management is not over but has migrated from stock picking to active asset allocation to generate Alpha.
Lumen takes a fresh look at the 60/40 asset allocation debate and revisits the meaning of the Modern Portfolio Theory.
As technology continues to evolve, customization in portfolio construction, i.e., selecting the set of investment alternatives first and then optimizing, is rapidly becoming the new norm in the wealth management industry.
Lumen discusses factor investing, an investment approach where stocks are selected based on quantifiable factors that drive the differences in risk or rate of return of stocks. The article describes the history of factor investing and provides insights into the use of various factors in portfolio construction and how Lumen quantifies these factors, especially the unique Economic Value Added (EVA) concept as metrics of value. We also shared some observations of the factors selected.
