PWM Intellectual Capital
Advancing Strategic Asset Allocation

Advancing Strategic Asset Allocation in a Multi-Factor World

Investment Strategy Group

Goldman Sachs Private Wealth Management

November 2012

Full Reprint: Advancing Strategic Asset Allocation in a Multi-Factor World

Strategic asset allocation is arguably one of the most important, yet least advanced, aspects of investing. The Investment Strategy Group in the Goldman Sachs Investment Management Division has developed a new approach to strategic asset allocation, which leverages the idea that long-term investment returns derive from multiple distinct sources called “return-generating factors.” This multi-factor approach is designed to help investors better understand the key sources of long-term return across asset classes and to increase the precision of long-term risk and return estimates. It also provides investors with a new way to think about portfolio diversification across the underlying sources of return.

In this article in the Journal of Portfolio Management, Investment Strategy Group members Farshid Asl and Erkko Etula describe the rationale behind a factor-based approached to strategic asset allocation.

The Investment Strategy Group is a part of the Investment Management Division of Goldman Sachs and is not a part of the Goldman Sachs Global Investment Research (GIR) Department. The views and opinions expressed by the Investment Strategy Group may differ from the views and opinions expressed by GIR or other departments or divisions of Goldman Sachs.