Adaptive Asset Allocation: Dynamic Global Portfolios to Profit in Good Times – and Bad

MARKET CRASHES CAN RUIN EVERYTHING, IF YOU′RE NOT ADAPTIVE

You think your portfolio is diversified, your investment returns will mirror what′s been observed through history, and your retirement is secure.

It may not be.
It probably won′t.
It probably isn′t.

Adaptive Asset Allocation can help. Building on a strong philosophical and research–driven foundation, the book demonstrates how a potent combination of global diversification, risk management, and alternative sources of returns can deliver steady performance regardless of economic and market environment.

Praise for ADAPTIVE ASSET ALLOCATION

"The ReSolve crew at their best Those enlightened advisors who understand the power of active asset allocation and risk management should read this book."
Mebane Faber, Author of The Ivy Portfolio and Global Asset Allocation

"This book is relevant and recommended for investors who wish to learn more about harvesting factor premia."
Jason Hsu, PhD, Co–Founder and Vice Chairman, Research Affiliates

"This book is dense with novel insights earning it a prominent place on my own financial bookshelf."
Doug Short, PhD, Advisor Perspectives

"Adaptive Asset Allocation merges empirical analysis and common sense to illustrate fundamental lessons in financial markets. The book has something for everyone: from retail investors to financial professionals. Read it!"
Wesley R. Gray, PhD, Alpha Architect

Acknowledgments

Part I: The Philosophy of Successful Investing

Chapter 1: The Most Important Concepts in Wealth Management

Chapter 2: The Narrative is Reality

Chapter 3: Tightly Grouped Arrows Nowhere Near the Bulls–eye

Chapter 4: What is "Gestalt?"

Chapter 5: Measuring the Relative Value of Portfolios

Chapter 6: The Whole is Greater than the Sum of Its Parts

Chapter 7: Our Process is a Financial Gestalt

Part II: Saving and Withdrawing from Portfolios

Chapter 8: Beware of Those Pesky Volatility Gremlins

Chapter 9: It s Not Just the Destination, It s Also the Journey

Chapter 10: In a Perfect World

Chapter 11: Home on the Range

Chapter 12: Timing is Everything

Chapter 13: Longevity Risk

Chapter 14: Plan for the Worst, Hope for the Best

Chapter 15: Sequence of Returns for Savers

Chapter 16: Individual Rate of Return for Savers

Chapter 17: Sequence of Returns for Retirees

Chapter 18: Do You Feel Lucky?

Part III: Current High Valuations Mean Lower Future Returns

Chapter 19: A Simple Model to Forecast Equity Market Returns

Chapter 20: Implied Future Returns over the Next 20 Years

Chapter 21: How Do We Do It?

Chapter 22: Forecasts 80% More Accurate Than Always Assuming Long–Term Averages

Chapter 23: Roller Coasters are for Amusement Parks

Chapter 24: The Last 5 Years Have Been a Triumph for the Ostriches

Part IV: An Investment Framework for Stability, Growth and Maximum Income

Chapter 25: A Word About Asset Allocation

Chapter 26: The Optimization Machine

Chapter 27: Garbage In, Garbage Out

Chapter 28: All We Know is that We Know Nothing

Chapter 29: If We Know How Assets Should Behave

Chapter 30: Our Structurally Diverse Investment Universe

Chapter 31: If We Can Estimate Volatility

Chapter 32: If We Can Estimate Volatility and Correlation

Chapter 33: If We Can Estimate Volatility, Correlations and Returns

Chapter 34: Summary of the Optimization Machine

Chapter 35: Building to Adaptive Asset Allocation

Chapter 36: Integration of Adaptive Asset Allocation

Part V: Why You Should Trust the Research

Chapter 37: The Usefulness and Uselessness of Backtests

Chapter 38: Tactical Alpha and the Quantitative Case for Active Asset Allocation∗

Chapter 39: Sensitivity of Safe Withdrawal Rates to Longevity, Market and Failure Risk Preferences with Implications for Asset Allocation

Chapter 40: Winning by Not Losing. Or, Bootstrapping to Estimate Risk

Final Thoughts

Bibliography

Index

ADAM BUTLER, CFA, is CEO of ReSolve Asset Management, a firm that specializes in ETF managed portfolio solutions for global asset allocation. Adam has over twelve years of experience in investment management, and is primarily responsible for investment research and asset allocation. He is also the lead author for the GestaltU blog.

MICHAEL PHILBRICK, CIM®, is President of ReSolve Asset Management. He has over twenty years of experience in investment management, contributes to ReSolve′s blogs and research, and is responsible for investment decisions, coaching, and strategic leadership.

RODRIGO GORDILLO, CIM®, is Managing Partner of ReSolve Asset Management. He has ten years of experience in investment management, contributes to ReSolve′s blogs and research, and is responsible for investment decisions and business development.