Capital Market Research
Asset allocation is the most critical decision in portfolio construction, accounting for as much as 90% of a portfolio’s investment returns. Consequently, WaterStreet allocates significant resources to capital markets research and the development of the capital market assumptions we use in strategic asset allocation. The Investment Committee reviews and, when necessary, adjusts our capital market assumptions for each asset class. This involves the evaluation of our expected return methodology, as well as the volatility and correlation inputs.

In our experience, a typical strategic asset allocation solution that considers only expected returns, volatility, correlation, time horizon, and asset class constraints will not consistently meet client objectives.  A dynamic, forward-looking process must also be applied to the investment structure to increase the probability of generating the required rates of return. Our forward-looking process considers asset class valuation, global monetary policy, country and regional GDP growth, trade and budget balances, and currency trends.