Introducing Asset Allocation Resilient to Systemic Risks

This white paper briefly examines the current standard asset allocation practice and introduces asset allocation methodology that incorporates Graham and Network Risks. Resilient asset allocation balances ambition to generate returns with the awareness of systemic risks. The results are compared with most common fixed-weight asset mixes as well as asset allocation implied by the risk parity approach.
In the past number of years LINKS have introduced and used network- and value-based risk management frameworks in order to gauge systemic risks inherent in institutional portfolios. Given the multiple layers of legacy asset allocation processes in place, implementation of LINKS risk frameworks has always been an add-on and ad-hoc exercise for institutional investors. However, as the methodology matures, there is more interest in a systematic asset allocation methodology that is based on LINKS risk frameworks.
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