RT Journal Article
SR Electronic
T1 Mass Customization of Asset Allocation
JF The Journal of Investing
FD Institutional Investor Journals
SP 73
OP 97
DO 10.3905/joi.2021.1.217
VO 31
IS 3
A1 Issaoui, Tarek
A1 Perchet, Romain
A1 Retière, Olivier
A1 Soupé, François
A1 Yin, Chenyang
A1 de Carvalho, Raul Leote
YR 2022
UL http://joi.pm-research.com/content/31/3/73.abstract
AB The digital transformation is creating a need for mass customization of tactical asset allocation (TAA). Asset managers publish TAA qualitative views regularly. However, the construction of robust portfolios from such views at large scale is often oversimplified. This article proposes a robust framework that enables the industrialization of highly customized TAA portfolios from a single set of investment views. The authors’ framework links the conviction of investment views to the consumption of risk and derives the expected returns accordingly. They show that robust optimization brings the level of consistency required for full automation of portfolio construction. They also show how a factor-based risk model can provide the level of transparency necessary for the interpretability of the framework.