A proactive approach to asset allocation strategies
 

Asset allocation is a key driver of quality portfolio construction, and quality results for investors. farrelly's Investment Strategy - the first independent, specialist asset allocation research service for investment advisers - is available exclusively through PortfolioConstruction Forum.

farrelly's is the Australian financial services industry's first dedicated asset allocation research house. It was established by the principal, Tim Farrelly, in 2004 to help advisers make superior asset allocation decisions for investors. Prior to founding farrelly's in 2004, Tim was an Executive Director of Macquarie Bank Ltd, and Director of Macquarie Investment Management Ltd. At various times during his 14 years at Macquarie he sat on the MIML Asset Allocation and Risk Committees, and was responsible for distribution of the Bank's products through independent financial planners and stockbrokers. While at Macquarie, Tim was responsible for the Long-Term Forecasting program in 2000 which foreshadowed the bearmarket in US equities. Tim has a MBA (Distinction) from the Harvard Business School and a Bachelor of Engineering (Met) from the University of Melbourne.
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The farrelly's approach to asset allocation is compatible with how investors really think, and what they want.

Portfolios are constructed to meet the investor's needs - the first step in portfolio design is to work out what the client wants and needs to achieve. It's not about asking clients their age or how aggressive they feel, so they can be squeezed into a preset box.

Return forecasts are forward-looking - in stark contrast to most of the industry, farrelly's asset allocation models are based on long-term, forward-looking forecasts.

Risk is the chance of not meeting the investor's needs - poor long-term returns are the major risk facing investors. Excessive volatility is a secondary, important risk. Tracking error or institutional business risk shouldn't enter into the equation.

There's more than one way to skin the cat - most of the time, there are many, equally valid asset allocations to achieve the investor's required outcome. While the asset allocation design must be underpinned by a set of rigorous principles and calculations, the final choice will come down to cost, risk, and personal preferences, to produce a portfolio that makes sense to the adviser and client.

Transaction costs and taxes matter - taxes and costs can consume half or more of total investment returns, so decisions to change asset allocations should take them into account, carefully weighing up the benefits.
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Proactive Asset Allocation Handbook - the quarterly Proactive Asset Allocation is published electronically, and emailed to subscribers in early March, June, September, and December. It features:
- farrelly's Editorial - exploring asset allocation "hot topics";
- farrelly's long-term outlook for markets;
- farrelly's Forecast in Focus - a detailed explanation of the outlook for an asset class;
- and, three different approaches to Implementation
   - A Directed approach - offering Model Asset Allocations, for those who believe
      asset allocation should be left to the experts;
   - An Advised approach - Model Asset Allocation ranges, for advisers who prefer to
      leave portfolios alone for the most part, and make asset allocation changes only
      when it is essential; and,
   - A Bespoke approach - Benchmark Asset Allocations for those who want to take
      control of the asset allocation process but want to do so within a disciplined and
      logical framework.

Proactive Asset Allocation Implementor - best suited to those subscribers taking the bespoke approach, this Excel-based software is updated quarterly and allows subscribers to adapt the Benchmark Asset Allocations to your clients' unique circumstances.

Proactive Asset Allocation Wizard - a much simpler version of the Implementor, this Excel-based software is best suited to those using the Directed or Advised approach. Updated quarterly, it allows subscribers to adapt the Model Allocations to your clients' unique circumstances. It automatically recommends how to place both new money and what changes should be made to existing portfolios.

Proactive Asset Allocation Presentation - Updated quarterly, this investor-friendly presentation includes a variety of slides that cover the basics of the farrelly's philosophy (we don't anticipate that you will use every slide with every client).

Proactive Asset Allocation Q&A - Features questions received from subscribers each quarter, which we publish for the benefit of all subscribers.

Proactive Asset Allocation Profiler - a simple tool that allows subscribers to determine clients' financial risk tolerance and match that to the farrelly's Model Allocations and Benchmark Allocations.
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farrelly's Investment Strategy is available by quarterly subscription, payable by credit card. 

Australian residents           $350+GST per quarter        Subscribe now >
NZ residents                      $350 (no GST) per quarter   Subscribe now >