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.
Have you missed the strong rally in the Chinese market since Fall of 2022 and wonder if you should get it?
See our view via this Tableau viz.
We are cautious though there are specific sectors like the financials that have value.
Contact us for more information.
Global Sectors Outlook as of June 2022 using the Residual Income Model and Lumen calculated Cost of Equity
Selected Regional Markets Outlook as of June 2022 – Value vs. Risk
Please check out the Intrinsic Value column for the ranking of value and the Intrinsic Risk column for the ranking of risk – based on the Residual Income Model.
While the current level of inflation is well above the long-term averages, there are good reasons to expect that inflation will remain benign, in Lumen’s view.
The less accommodative monetary policy points to higher real rates and possibly a healthy market correction typical in a late-cycle policy tightening.
The money management industry is undergoing a seismic shift. The old active money management model picking stocks, bonds, or star managers no longer provides a reliable source of return. Active and detailed global asset allocation that is highly customized is becoming the most effective investment style for outstanding results.
Wealth managers, family offices, and other institutional investors will be empowered by digital investment solutions that leverage essential data, technology, and financial innovations to perform crucial investment functions at a fraction of the cost of an entire investment team. Moreover, as wealth changes hands, investment advisors that incorporate digital tools can better capture this new generation of wealthy clients.
