Asset Allocation Strategies

Asset allocation is a portfolio management process where various asset classes (stocks, bonds, commodities, etc.) are combined in one portfolio. Risk and return are considered for the complete portfolio as opposed to evaluating individual securities or investments. Properly implemented, asset allocation is a time-tested approach that addresses risk through diversification, while positioning portfolios to achieve growth, income and other client-specific objectives. Our portfolios offer a broad spectrum of risk profiles, ranging from a conservative posture in the Income strategy to a more risk-tolerant profile in Aggressive Growth.

Confluence recognizes that risk levels and return potential rise and fall over market and economic cycles. Therefore, we apply an adaptive process, one that evaluates economic and market variables in a forward-looking context. Our approach evaluates the investing landscape against the backdrop of the pending business cycle—a rolling time frame continuously looking forward at the next three years, implemented via quarterly rebalances. The intention is to remain within an acceptable risk profile, while changing the asset class mix to optimize return potential. We may adjust allocations in much shorter time frames, depending upon changing views of the marketplace and economy. Alternately, we may continue for several quarters without making significant allocation adjustments if we believe the existing posture remains optimal.

The asset allocation portfolios utilize exchange-traded funds (ETFs). We may use ETFs that allow us to focus on or avoid particular industry sectors, bond maturities, commodities or countries.

Asset Allocation Bi-Weekly Reports – Reports on macro factors informing the investment process
Asset Allocation Quarterly – Fourth Quarter 2024 – Market outlook & rationale for portfolio allocations
Quarterly Rebalance Presentations – Video discussions further highlighting current viewpoints
Asset Allocation Strategies Fact Sheet

Income

The Income strategy is primarily focused on reliable income and is appropriate as a complementary strategy for investors in the distribution phase for their investments. The majority of its allocation is in fixed-income asset classes with the core being a ladder of target maturity ETFs, with each of the next 10 years representing a fixed percentage of assets. A small portion of the portfolio may include real estate, equities, and commodities to contribute growth potential and diversification benefits. The profile is similar to a diversified bond portfolio with a small portion allocated to equities, when appropriate.

Income with Growth

The Income with Growth strategy is oriented toward reliable income, moderate volatility, long-term growth and principal preservation. Although the portfolio typically has the majority of its allocation in fixed-income asset classes, a smaller portion may include real estate, equities, and commodities. These asset classes contribute growth potential along with diversification benefits. The profile is similar to that of a diversified bond portfolio alongside a smaller proportion of equities.

Growth & Income

The Growth & Income strategy combines objectives of growth and income, with more emphasis on growth. The growth allocation may include equity asset classes ranging from small cap to large cap, with both domestic and international equities. Commodities may be utilized for total return as well as diversification benefits. Fixed-income and real estate allocations will normally form the foundation to pursue income objectives. The profile is similar to a portfolio with a blend of stocks and bonds.

Growth

The Growth strategy is positioned to pursue capital appreciation. The allocation may include equity asset classes ranging from small cap to large cap. International allocations may include both developed and emerging markets, while commodities, real estate, and fixed income may be utilized for total return and diversification. The profile is similar to that of a diversified all-equity portfolio.

Aggressive Growth

The Aggressive Growth strategy is focused on capital appreciation and is designed for investors that can tolerate higher levels of risk. The allocation may include domestic and international equity asset classes, as well as commodities, real estate, and occasionally fixed income investments. At times, the portfolio may be more concentrated in asset classes with higher return potential, including those with higher levels of volatility. The profile is similar to that of an aggressively positioned, all-equity portfolio.