Adaptive Asset Allocation: A Different Way to “Manage Futures”

By most measures U.S. stocks and global bonds have pushed well into high valuation territory, which has preceded periods of very-low prospective returns in the past. For investors to achieve the same results as they achieved over the past 10 years in the next decade, we will have to experience a third major bubble in a row.

As a result, we believe that investors with material quasi-passive allocations to U.S. equities and global fixed income are going to be disappointed with their returns over the next decade or so. We aren’t alone with this view; there is broad consensus across many credible sources, including AQR, Research Affiliates, and others, that traditional portfolios may produce insufficient returns.

To address these shortcomings, we advocate a portfolio framework that emphasizes global scope while maximizing diversification across asset classes, macro factors and alternative premia. This solution offers a greater likelihood of producing the returns investors need, with less risk than they would be taking with a traditional approach. Resolve Asset Management designed the Adaptive Asset Allocation concept to deliver on this vision.