Overview of the WealthBuilder Program
The WealthBuilder program is designed as an efficient investment management solution that offers asset allocation and manager selection to our clients. Our Asset Allocation Committee oversees the asset allocation process that is utilized in the WealthBuilder program. The process establishes both long-term (strategic) and short-to-intermediate-term (tactical) asset allocation targets. The long-term asset allocation targets are developed by combining historical risk, return, and correlation data with state-of-the-art optimization techniques. The Asset Allocation Committee meets on a quarterly basis and as needed to discuss the committee members’ views and expectations for the economy, review our capital market assumptions, and assess the risk and opportunities in the marketplace over the short-to-intermediate-term to formulate the tactical asset allocation changes.
WealthBuilder Changes in August
- Strategic Allocation Changes
The Asset Allocation Committee recently completed an asset allocation study that optimized the allocations of the different investment objectives based on risk. Based on the results of the study, the Committee decided to enhance the seven investment objectives ranging from Income Conservative, which is invested in fixed income only, to Growth Aggressive, which is invested in equity only. The five investment objectives in between consist of a combination of fixed income, equity and alternative investments, with varying allocations to each category based on different levels of risk. Since we utilize alternatives to mitigate risk, the asset allocation of the Growth Aggressive strategy, the most aggressive strategy with a focus on capital appreciation, no longer includes an allocation to alternative investments. Given that these changes are strategic or long-term in nature, changes were also made to the blended benchmarks to reflect the strategic allocation adjustments with the addition of components representing high yield, global bond, emerging market equity (as part of the international equity) and alternative investments.
- Tactical Allocation Changes
The Asset Allocation Committee recommended an underweight to fixed income and an overweight to equities, as the Committee saw better prospects for positive total returns in global equity markets than global fixed income markets. While the Fed would likely remain accommodative and an actual tightening of monetary policy was still for future discussions, the Committee did feel that the trend in interest rates would provide a headwind for the fixed income market. As a result, the following changes were made across the different investment objectives, as applicable.
- Increased overall equity
- Increased domestic equity
- Increased developed international equity
- No change in emerging market equity
- No change in high volatility alternatives
- Reduced overall fixed income
- Reduced core fixed income
- Increased low volatility alternatives
- Fund Changes
- Added DWS Global Infrastructure as the new sub-asset class was incorporated into high volatility alternatives
- Removed Vanguard Intermediate-Term Bond as we emphasized active management in the fixed income space in a potential rising rate environment
- Diamond Hill Long-Short, Permanent Portfolio and PIMCO All Asset were reduced by half in the Growth Aggressive strategy as a result of the strategic allocation changes outlined above
WealthBuilder Changes in September
- Tactical Allocation Changes
The Asset Allocation Committee recommended a reduction of the overweight in emerging market equity. The rationale was that emerging markets appeared to be most vulnerable to the Fed’s potential tapering of the asset purchase program. Given we were underweight in developed international equity versus the neutral allocations, the following changes were made across the different investment objectives, as applicable.
- Increased total international equity allocation
- Reduced emerging market equity
- Increased developed international equity
- Reduced mid cap
- Increased long-short equity at the expense of real estate and diversified alternatives
- No change to the overall equity or fixed income
- Fund Changes
- Added Calamos Market Neutral to the low correlation strategy space within low volatility alternatives
- Diamond Hill Long-Short, Permanent Portfolio and PIMCO All Asset were removed from the Growth Aggressive strategy as a result of the strategic allocation changes outlined above
