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Investment strategy
November 19, 2020
2 mins

Strategic Asset Allocation

November 19, 2020
2 mins
Gregory Van Inwegen
Global Head of Quantitative Research and Asset Allocation - Citi Investment Management
Paisan Limratanamongkol
Head of Quantitative Research and Global Asset Allocation Citi Investment Management (CIM)
Xin He
Lead, Quantitative Research and Asset Allocation team Citi Investment Management
A business man and a business woman chatting at a laptop
SUMMARY

Strategic Asset Allocation for Endowments, Foundations and Non-profits: Fixed Income Component.


Though various fixed income weightings might provide similar overall performance, in our analysis one weighting in particular has offered potentially better downside protection over full market cycles for Endowments, Foundations and Non-Profits (EF&Ns). We capture this weighting and the present-day implications for EF&N’s in Strategic Asset Allocation for Endowments, Foundations and Non-Profits: Fixed Income Component.

  • Given the long-term nature of the E&F investment horizon, it makes sense that there is a significant weighting to long duration fixed income securities, possibly both government and corporate bonds. Not all weightings have provided the same downside protection, though
  • While the analysis of benchmarks on a stand-alone asset class basis is of some interest, what is of most importance in a strategic asset allocation, in our view, is the behavior of the asset classes in a portfolio context
  • From this perspective, one weighting has the highest potential to serve as both a source of income for E&Fs’ periodic cash flow needs and as partial ballast against equity risk within the portfolio based on past periods of market stress. 

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