Portfolio Construction

Once the Investment Strategy has been decided, the next stage in the process is to determine what the best investment portfolio approach is to achieve the investment objectives. This is called Portfolio Construction as this stage will determine what the structure of the underlying portfolio will look like across the various asset classes available. The analysis will include the following:

• The broad asset classes available.
• The risk and return relationships of each asset class; and
• The diversification benefits will be considered, and a mix of exposures determined.

The basic portfolio structure will start with the traditional asset classes and then be tailored to address any risk specific issues that may be required under the investment objectives.

Traditional Assets	Alternative Growth Assets	Alternative Income Assets
Shares	Commodities	Hedge Funds
Property	Infrastructure	High Yield Debt Securities
Fixed Interest	Convertible Preference Shares	Term Deposits
Cash	Managed Futures	Cash equivalents

Following on from the Portfolio Construction, Asset Allocation will address how much of the client’s total portfolio capital is to be invested across the available asset classes.