Asset Distribution Modelling
Posted: November 22nd, 2017, 10:40 pm
Once upon a time over at The Motley Fool I posted a couple of updates on the Portfolio Management & Review board under the title of “This Foolish Money Digger's Journey”, the last posting being on 27th September last year on the 5-year anniversary of my SIPP portfolio. And, thanks to Breelander’s post of 10th August pointing me in the direction of Web Archive.org, I was able to locate and convert the post to a PDF that can be viewed (as a point reference) at …
https://1drv.ms/f/s!ApxMvaOnHy3Fg3wAy_KTgJwN9Pda
Click on the "Open" tab (top left-hand corner) to open PDF in browser
More than a year as now past by since I made that post, so maybe time for an update. However, that’s not really what I want to go on about as the title heading of this post should indicate. Nevertheless, I feel I can’t let the matter of an update pass. Therefore, rather than post an update direct to this board I’ve put together a little presentation for anyone interested enough to want to access it at …
https://1drv.ms/f/s!ApxMvaOnHy3Fg3u4GKJ2bsy1yz28
Basically, the headline numbers are:
Since last update on 27th September last year … UP +17.2%
Since commencement on 1st October 2011 … UP in total +126.6% after 6.15 years
Rather what I’ve been giving thought to during recent days, following an exchange of PMs with a fellow Melon Fool, is how I am doing this and what part (if any) has asset distribution modelling played in my success to date - or have I just been lucky.
As stated in my TMF post of a year ago, I’ve adopted an asset distribution model along the lines pioneered by the California Public Employee’s Retirement Scheme (CalPERs). The methodology centres on the use of ‘Interim Strategic Targets’ – referred to as ISTs ...
Interim … meaning the intervening time.
Strategic … meaning the identification of long-term or overall aims and interests and the means of achieving them.
Targets … meaning the aim of attack.
As value-driven investors, CalPERs reasoning was that value appears then it disappears only to appear somewhere else, and so on, and so on. In fact, investing for value is a never ending search for opportunities. And, therefore it follows, that the composition of assets being held must also change over time in order to meet the retirement expectations of California’s public employees. Interim strategic targeting being at the centre of CalPERs chosen way of facilitating such changes in portfolio composition.
So, how do I make interim strategic targeting work for me?
Well, if you care take a look at the uploaded image at …
https://1drv.ms/f/s!ApxMvaOnHy3Fg32J_6fqCNV6CK3-
Column 1: Contains text information of holdings and regional area distributions
Column 2: Contains portfolio % weightings of “Current Capital Distributions” of holdings and regional areas
Column 3: Contains portfolio % weightings of “Current Income Distributions” of holdings and regional areas
Column 4: Contains “Model IST Allocation” of holdings and regional areas
Column 5: Contains “Under Over” % amounts that Column 4 “Model IST Allocation” differs from Column 2: “Current Capital Distributions” of holdings and regional areas
Column 6: Contains “Under / Over in Sterling Terms” being the amount that Column 4 “Model IST Allocation” differs from Column 2: “Current Capital Distributions” of holdings and regional areas
Column 7: Should be self-explanatory
Other than having to manually adjust the “Model IST Allocation” of Column 4 when required, the data generated in the other columns is linked into data generated by a ‘master’ spreadsheet containing more detailed information of the holdings located on another sheet of the workbook.
The spreadsheet display can be configured to accept other asset classes and regional localities if required.
The more I use this approach, the more I think what CalPERs have come up with is a form of tool for macro management. For as the macro manager, I’m the one who decides …
… where the money goes or does not go?
… what the money buys or does not buy?
… what part of the world I want that to be or do not want that to be?
… who am I going to pick to do the micro stock picking jobs and who I’m going to steer clear of?
It can’t all be luck I must be doing something right. I’m just thinking out loud as what it could be.
Discuss.
https://1drv.ms/f/s!ApxMvaOnHy3Fg3wAy_KTgJwN9Pda
Click on the "Open" tab (top left-hand corner) to open PDF in browser
More than a year as now past by since I made that post, so maybe time for an update. However, that’s not really what I want to go on about as the title heading of this post should indicate. Nevertheless, I feel I can’t let the matter of an update pass. Therefore, rather than post an update direct to this board I’ve put together a little presentation for anyone interested enough to want to access it at …
https://1drv.ms/f/s!ApxMvaOnHy3Fg3u4GKJ2bsy1yz28
Basically, the headline numbers are:
Since last update on 27th September last year … UP +17.2%
Since commencement on 1st October 2011 … UP in total +126.6% after 6.15 years
Rather what I’ve been giving thought to during recent days, following an exchange of PMs with a fellow Melon Fool, is how I am doing this and what part (if any) has asset distribution modelling played in my success to date - or have I just been lucky.
As stated in my TMF post of a year ago, I’ve adopted an asset distribution model along the lines pioneered by the California Public Employee’s Retirement Scheme (CalPERs). The methodology centres on the use of ‘Interim Strategic Targets’ – referred to as ISTs ...
Interim … meaning the intervening time.
Strategic … meaning the identification of long-term or overall aims and interests and the means of achieving them.
Targets … meaning the aim of attack.
As value-driven investors, CalPERs reasoning was that value appears then it disappears only to appear somewhere else, and so on, and so on. In fact, investing for value is a never ending search for opportunities. And, therefore it follows, that the composition of assets being held must also change over time in order to meet the retirement expectations of California’s public employees. Interim strategic targeting being at the centre of CalPERs chosen way of facilitating such changes in portfolio composition.
So, how do I make interim strategic targeting work for me?
Well, if you care take a look at the uploaded image at …
https://1drv.ms/f/s!ApxMvaOnHy3Fg32J_6fqCNV6CK3-
Column 1: Contains text information of holdings and regional area distributions
Column 2: Contains portfolio % weightings of “Current Capital Distributions” of holdings and regional areas
Column 3: Contains portfolio % weightings of “Current Income Distributions” of holdings and regional areas
Column 4: Contains “Model IST Allocation” of holdings and regional areas
Column 5: Contains “Under Over” % amounts that Column 4 “Model IST Allocation” differs from Column 2: “Current Capital Distributions” of holdings and regional areas
Column 6: Contains “Under / Over in Sterling Terms” being the amount that Column 4 “Model IST Allocation” differs from Column 2: “Current Capital Distributions” of holdings and regional areas
Column 7: Should be self-explanatory
Other than having to manually adjust the “Model IST Allocation” of Column 4 when required, the data generated in the other columns is linked into data generated by a ‘master’ spreadsheet containing more detailed information of the holdings located on another sheet of the workbook.
The spreadsheet display can be configured to accept other asset classes and regional localities if required.
The more I use this approach, the more I think what CalPERs have come up with is a form of tool for macro management. For as the macro manager, I’m the one who decides …
… where the money goes or does not go?
… what the money buys or does not buy?
… what part of the world I want that to be or do not want that to be?
… who am I going to pick to do the micro stock picking jobs and who I’m going to steer clear of?
It can’t all be luck I must be doing something right. I’m just thinking out loud as what it could be.
Discuss.