Asset allocation refers to the portion of a portfolio invested in stocks, bonds and cash (and their subsets like Canadian stocks, U.S. stocks, International stocks, Domestic fixed income etc).

Studies* have shown that asset allocation explains up to 93% of the return difference between portfolios. Getting this right is very important.

Traditional approaches to asset allocation rely on historical return information. This is, of course, unreliable. Everyone should know that historical performance is no indication of future performance. This must be true or the securities commissions wouldn't insist that it be present in all fund advertisements (i.e. “smoking will kill you” on cigarette packages). The alternative is to rely on portfolio managers “feeling” about the future. Not very reliable either.

PŮR uses a more sophisticated two step approach based on client goals (using a behavioral profiler, see below) and market volatility. The results are more consistent and risk is managed more effectively.

More detailed information to follow. In the interim see the page : Risk Budgeting