Ultra-Modern Portfolio Theory: Asset Allocation Frameworks to Achieve Client Objectives

Just as it is difficult to chart a course without knowing the distance or destination, only by completing a financial plan can we know if an individual is set up for a financially successful future. Our financial planning process leads to designing a solution with the highest probability of achieving success for each client. We align a range of strategic portfolios guided by the Asset Allocation Frameworks to consider:

  • A detailed study of current assets
  • Future cash flow needs
  • Long-term objectives

The study of portfolio design among multiple investments began with Harry Markowitz in 1952, eventually resulting in the formalized "Portfolio Theory" (or Classic Portfolio Theory, CPT). Still, there are reasons to challenge the basic assumptions of CPT, such as:

  • Behavioral finance
  • Market anomalies
  • Statistical inconsistencies

Because of this, portfolio construction today results in asset and liability mismatches, often fails to achieve true risk diversification, and does not dynamically assess asset class valuations. Our Whitepaper explains our investment philosophy and advances upon the seminal work of CPT, which we coin as Ultra-Modern Portfolio Theory, to improve overall outcomes for investors.

We developed the Aurum Asset Allocation Frameworks to incorporate the investment concepts and principles of Ultra-Modern Portfolio Theory. Thus, the five frameworks include behavioral finance ideas and include alternative asset classes, to increase the portfolio opportunity set while lowering the likelihood of capital impairment. The frameworks are not static and our investment process continuously assesses valuation and thus future return and risk characteristics for each asset class.

Contact Aurum Advisory Services
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