Foundation Number 2: Strategic Asset Allocation or Asset Mix
Cardea’s investment Foundation No. 2, is our asset allocation model which is built to give us the overall allocation weights for the portfolio. These weights are established through the proprietary model in tandem with internal and external research and are to be kept at all times within a pre-set target allocation span which is reviewed every six months.
The importance of sound asset allocation is as well an empirically and academically well-established fact. Research shows that as much as 91.5%[1] of returns in a portfolio are generated by the portfolios asset allocation. Looking at asset allocation used in practice the large endowments in the US with Yale as the leader has been practicing this with large success for over two decades.
Cardea believes the continued exposure to the majority of the previously mentioned asset classes on an ongoing basis is absolutely critical! The simple reason is that no one can with full certainty predict which asset class will perform best each time. Therefore, we will need to have exposure towards all of them and then rebalance our holdings regularly depending on the development of each asset class.
Essentially, we achieve what all investors are trying to do. Still, few succeed: We gradually take profits when we have them and redistribute these profits into assets which have lagged during that time period, i.e. we buy low and sell high just like we are supposed to do.
The enormous variation in performance between some of the asset classes we follow is easily consumed by the below graph.
[1]Source, Brinson, Hood & Beebower, Financial Analyst Journal, 1986 ; Brinson, Singe & Beebower, Financial Analyst Journal 1991
Mosaic Global Fund
Cardea International's Mosaic Global Fund is aimed at investors that would like to grow their capital at a reasonable pace with a strong focus on capital protection.
