Asset Class Expectations (ACE)
Research shows that most investment success (90%) comes from choosing the right mix of asset types, like equities, bonds, or real estate, rather than picking individual stocks. So, we focus on getting our asset allocations right rather than researching and trying to find undervalued companies. We call this our ACE model (Asset Class Expectations)
We begin our process by reviewing historical data. Then, we apply quantitative methods and proven models—like Markowitz mean-variance optimization and Black-Litterman reverse optimization—to determine the ideal asset allocation for the past 12–18 months. Next, we compare this to our current asset allocation, which is based on our forward-looking ACE models. Where differences appear, we examine the causes and confirm whether our ACE models remain valid. This is an ongoing, interactive process.
Our ACE model rates diverse types of asset classes, like equities or bonds, on a scale from 1 to 5. A score of 1 means we’re optimistic about that investment’s performance over the next 12 to 18 months, while a 5 means we’re less optimistic. Lower scores are better. South Africa is grouped with other Emerging Markets (EM). Signup for Quarterly ACE Report
Strategy Implementation
We use low-cost, reliable index funds (ETFs) from major institutions for our investment strategy because they are cheaper and less risky than actively managed funds.
Some stock-picking managers can outperform the market, but it’s tough for investors to choose the right one. The top-performing manager keeps changing, so investors must consistently pick the right manager and fund at the right time in the market cycle