Oxford Financial Group, LTD.

The asset allocation decision is the most important determinant of portfolio returns.  Generally speaking, the selection and weighting of asset classes has a greater influence on a portfolio’s performance than the asset managers chosen to fill each style assignment.  The role of asset allocation in the program implementation process is to maximize the level of portfolio expected return for a given level of risk, or conversely to minimize the risk for a given level of expected return. 

Strategic Asset Allocation

Strategic asset allocation refers to the long-term asset allocation mix targeted for the portfolio.  Strategic asset allocation can be viewed as the “normal” mix of asset classes and investment styles considered most likely to achieve the investor’s long-term goals.  Oxford utilizes a combination of quantitative tools and qualitative judgment to arrive at an “optimal” strategic asset allocation for each client.  Once established, strategic asset allocation is passive in nature.  While it does require periodic rebalancing and review, a client’s strategic asset allocation is not expected to change frequently. 

Tactical Asset Allocation

Tactical asset allocation is defined as intentional deviations from strategic asset allocation targets to take advantage of perceived near-term market opportunities.  Oxford believes strategic and tactical asset allocation approaches are complementary, not mutually exclusive.  Tactical asset allocation enhances the potential return benefits of the asset allocation strategy by allowing a degree of opportunistic flexibility.