farrelly's Investment Strategy

a proactive, forward-looking approach to asset allocation

farrelly's Investment Strategy provides tools and services to enable a proactive, forward-looking approach to asset allocation, a key driver of quality portfolio construction and quality results for investors.

Established in 2004, farrelly's Investment Strategy is the first independent, specialist asset allocation research service for investment advisory firms in Australia and New Zealand. It offers a web-based subscription service as well as consulting services, all grounded in a logical, client-focused, forward-looking risk and return forecasting framework based on a robust approach that has stood the test of time.

farrelly's Investment Strategy will help you create robust portfolios compatible with how investors really think and what they really want.

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Why is it different?       What does it include?       Who is farrelly's?       What does it cost?                  Send me more info >

Who is it suited to?

farrelly's Investment Strategy is suited to portfolio construction practitioners - and in particular, investment advisers and financial advisory firms - which want to take a proactive, forward-looking approach to asset allocation.

What makes it different?

farrelly's Investment Strategy is compatible with how investors really think, and what they want - so the farrelly's approach is based on five core beliefs.

Portfolios are constructed to meet investors' 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. The main driver should be meeting investors' current and/or future cash flow needs with an acceptable level of certainty.

Risk is the chance of not meeting the investor's needs - risk, like beauty, is in the eye of the beholder. farrelly's believes it is best assessed from the investors' perspective. The most important risk to any investor is rarely associated with a Greek letter - rather the key risk is poor, long-term, real returns resulting in insufficient cash flow to meet their needs. Excessive volatility is a secondary, albeit important risk. Tracking error or institutional business risk shouldn't enter into the equation.

Return forecasts are long term and forward looking - in stark contrast to most of the industry, farrelly's asset allocation models are based on long-term, forward-looking return forecasts for each asset class, using a robust approach that has stood the test of time. It breaks returns into three components of income, income growth and the effect of changing valuation ratios, and provides clear insights into long-term future returns which are infinitely more reliable than historical extrapolations.

There's more than one way to skin the cat - portfolios don't have to be theoretically perfect - 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.

What does it include?

Consulting

farrelly’s works on a fee for service basis with firms' in-house staff to build an asset allocation process incorporating the firm’s preferred asset sectors, its beliefs and expectations about those sectors, and its thinking about risk and how to manage it.

In addition, farrelly's provides ongoing consulting input into advisory firms' investment committees.

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Proactive Asset Allocation Service

The Proactive Asset Allocation service is a subscription-based, multi-faceted publication, updated quarterly in early March, June, September and December. It has five components.

Proactive Asset Allocation Handbook
This 24-page Handbook features editorial exploring investment strategy "hot topics", farrelly's long-term forecasts for asset classes, a detailed review of the long-term forecasts for an individual asset class (rotating across asset classes each quarter) and three asset allocation models to assist with implementation.
1. a Directed approach - model asset allocations for those who believe asset allocation is best
    left to the experts and therefore want an exact model to follow;
2. an Advised approach - model asset allocation ranges, for those who prefer to leave
    portfolios alone for the most part, and make changes only when it is essential;
3. a Bespoke approach - benchmark asset allocation models for those who want to take
    control of the asset allocation process within a disciplined and logical framework.

Proactive Asset Allocation Wizard
This simple-to-use Excel-based software is best suited to those using the farrelly's Directed or Advised approach (see above). It enables subscribers to adapt the model asset allocations to create optimal portfolios for clients' unique circumstances, automatically recommending how to place new money and what changes should be made to existing portfolios.

Proactive Asset Allocation Implementor
This more advanced Excel-based software is best suited to subscribers using the farrelly's Bespoke approach. It enables subscribers to adapt the benchmark asset allocations to individual client circumstances including:
- incorporating your own views on fees and fund manager value add into the return forecasts
- examining the impact of transaction costs on portfolio changes
- comparing your bespoke asset allocation models to finametrica risk profiles
- generating Monte Carlo simulations to project the range of possible returns from a portfolio
- exporting the data for use in other applications
- printing out a support document for inclusion in a Statement of Advice.

Proactive Asset Allocation Presentation
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 Profiler
A very simple tool that allows subscribers to determine clients' financial risk tolerance and match that to the farrelly's model asset allocations.

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Ongoing training
and support

Who is farrelly's

farrelly's is one of PortfolioConstruction Forum's core research and content partners.

Tim Farrelly
Principal, farrelly's

Established in 2004, farrelly's is is the first independent, specialist asset allocation research service for investment advisory firms in Australia and New Zealand.  It's founder, Tim Farrelly, brings a unique combination of analytics, understanding of financial markets, knowledge of capital market history and insight into the practical requirements of financial advisers. Prior to founding farrelly's, Tim was an Executive Director of Macquarie Bank Ltd, and Director of Macquarie Investment Management Ltd (MIML). 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 third party financial planners and stockbrokers. Between 1981 and 1986, Tim was head of research for financial advisory firm, Monitor Money, where he was responsible for asset allocation and manager selection. He has an MBA (Distinction) from the Harvard Business School and a Bachelor of Engineering (Met) from the University of Melbourne, where he was awarded the J.Neill Greenwood Medal.

What is the cost?

farrelly's Investment Strategy is available by quarterly subscription, payable by credit card.

Australian residents

$350+GST per quarter

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NZ residents

$350 (no GST) per quarter

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