Portfolio check

Background

The strategic orientation of the allocation determines the long-term profitability of the portfolio. FERI’s own estimate of the long-term profitability of individual asset classes is updated quarterly as part of an integrated process of collaboration between the teams in charge of consulting, economic Research and portfolio management. By evaluating the current portfolio in terms of expected returns and risks (e.g. volatility and value at risk), it is possible to check whether the current allocation still meets the requirements on yields and risk budget. FERI presents alternative portfolios that promise higher returns with the same risk or offer the similar opportunities for returns with at a lower risk.

Objectives

• Assessment of the risk/return characteristics of the existing allocation
• Proposals for reallocating the portfolio or for future investment priorities
• Guidance on the necessary risk budget

Analysis

• Analysis of the return and risk potential of the current asset allocation and comparison with the requirements (actuarial interest rate, risk budget, etc.)
• Analysis of the effects of a variation in asset allocation with regard to expected returns and risks

Outcome 

• Presentation of key figures of alternative, profitable portfolios
• Proposals for restructuring and/or adding further asset classes
• No direct inclusion of the liabilities side (no actuarial considerations/obligations), but reconciliation with actuarial interest rate where required

Example for portfolio check

1. Calculation of portfolios with a better risk/return ratio
2. Review of the possibility of achieving the target interest rate while minimizing the risk to be taken or determination of the maximum yield with the permissible risk budget
3. Plausibility check of the results and aggregation of several possible target portfolios into strategic target ranges, possibly supplemented by tactical fluctuation ranges
4. Presentation of the investment or reallocation requirements for each asset class