Investment portfolio return
Long-term investment policy
Active asset allocation
- Long-term investment policy: Because it indicates long-term risk and return expectations, the investment policy is not typically changed.
- Active portfolio management may vary asset allocation, security selection or both.
– Security selection: When security return correlations are high as they often are, security selection has little influence on portfolio return.
– Active asset allocation: Asset returns typically vary a great deal, reflecting both assets’ characteristics and differences in economic conditions across regions. For this reason, there are usually many opportunities to add value via active asset allocation.