Strategic asset allocation
Adaptive Valuation Strategies is our own distinctive strategic asset allocation methodology, which we use to customize a long-term investment plan for you.
By assembling an appropriate mix of equities, fixed income, cash, and other asset classes, you can potentially enhance your core portfolio’s returns and help manage risk.
Adaptive Valuation Strategies (AVS) is Citi Private Bank’s own distinctive strategic asset allocation methodology, which is built upon key principles from our Investment Philosophy.
AVS’s aim is to maximize your returns given the amount of risk you are willing to take.
Our investment process therefore begins by gaining an understanding of your return goals, risk tolerance, and your liquidity, geographic, and currency preferences.
We then customize a long-term plan – or strategic asset allocation – to pursue your goals.
AVS has five levels of allocation according to how much risk you are willing to take on.
Having established an appropriate long-term plan for you, we make tactical adjustments to it, based on the outlook for the next 12 to 18 months.
The long-term plan we create for you highlights what we believe to be the optimal course for pursuing your investment goals in your core portfolio.
It is built upon principles established through academic research and proven in practice, and which help form our Investment Philosophy.
These include global multi-asset class diversification, the discipline of regular portfolio rebalancing, and staying fully invested for the long term.
SREs are based on valuations and other fundamentals.
When an asset class valuation is expensive or cheap compared to its long-term average, AVS lowers or raises its SRE respectively.
This is because low valuations have tended to give way to high subsequent returns and high valuations to low returns.
A lower SRE will likely lead AVS to recommend a smaller allocation to an asset class, and a higher SRE to a larger allocation.
Traditional asset allocation methodologies have often failed to anticipate the frequency and severity of such losses.
AVS therefore uses a specialized measure of risk called Extreme Downside Risk (EDR), which draws upon many decades of asset class history to highlight the risks you may face.
There is a close relationship between SREs and EDRs: higher returns come with higher risks attached.
AVS’s estimates of annualized returns over a ten-year horizon – Strategic Return Estimates (SREs) – are generally updated on a calendar basis annually, but in extreme circumstances could be updated intra-year.Read more about AVS
Gregory has overall responsibility for quantitative research and asset allocation within Citi Investment Management. He oversees Adaptive Valuation Strategies, our methodology for determining the suitable long-term mix of assets for each client’s portfolio. He also serves as Vice Chairman of the Private Bank’s Global Investment Committee, which sets our tactical asset allocation policy.
Previously, he was chief investment risk officer at Ivy Asset Management, director of research at Rydex Investments and a director at the global research center in Deutsche Asset Management.
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