Dynamic Asset Allocation II:

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The Team behind the TW Portfolio started out by building a Long Term Strategic Asset Allocation model as a theoretical project over 20 years ago.

 

Over that time, working as part of a substantial Private Office for a global family, the theoretical model performed so well throughout the investment cycles and economic shocks of the millennium, the model evolved into an actual investment programme for a number of significant families which continues to deliver strong, stable and impressive performance.

 

I have always been fascinated by the simplicity of the model outcomes; a portfolio which is easy to understand and evaluate by the most financially ambivalent family members, but underpinned by sophisticated analytics that will be appreciated by the most sophisticated of investors.

 

This is how it works:

 

 

The TW Report provides a framework for decisive asset allocation decisions

 

Forecasting is seductive but there is overwhelming evidence that economic and earnings forecasts are virtually useless.

 

Strong inferences can be made about the probable future direction of asset prices based on what we can observe today. This is the basis of TW.

 

 

The TW REPORT

 

  • Indicators have been developed from unrelated data sources to form sub models which are combined to form master models which systematically appraise the likely future direction of equity markets, gold and bonds 

 

  • Indicators have been back tested over decades to gauge the persistency of signals from an indicator or model 

 

  • The master model works on a “weight of evidence” approach, ensuring that no one piece of information is given too much weight in the decision making process 

  • The master models allows us to act decisively at turning points in what are likely to be highly uncertain times 

 

 

THE MODELS

 

  • The models are generally long term in nature aiming to sidestep large down moves. The TW Equity/Bond model has generated 48 signals since 1969 

 

  • The models aim to maximise returns from a long only perspective, albeit they are effective as long/short 

 

  • Different data and indicators have different usefulness depending on the stage of the economic cycle and volatility environment. The TW assesses many indicators with different time frames 

 

  • The TW Equity/Bond master model has the greatest influence, ensuring that we invest in harmony with the major trends 

 

  • The analysis is on S&P 500, US Ten Year Bond, gold and Russell equity style indices 

 

 

Ultimately, the dynamic management of asset allocation is very important to enhancing the real value of your wealth; and we believe that human bias and emotion often hinders effective asset allocation decisions.

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