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.jpg) We believe asset allocation is the key driver of portfolio returns. This is based on our own experience and demonstrated in research papers by authors including Ibbotson and Brinson. Many traditional asset allocation models focus on diversity across a broad range of asset classes with little consideration for long term returns. Our approach is different.
An understanding of long term drivers of investment returns is important in building effective investment strategies. We apply the Three Factor Model developed by Eugene Fama and Ken French when developing portfolios for clients. Their research demonstrated a persistent difference between investment returns based on three primary factors; the decision between equity and debt, company size and valuation. Those factors are important in domestic and international markets.
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