Asset Allocation and Top-Down Portfolio Construction

In this presentation made to the Financial Accounting Standards Board (FASB) in October 2021, as part of their ‘Think Like an Investor’ series, I draw upon my experience to highlight important issues in top-down multi-asset portfolio construction. I mention well-known empirical findings on the key value addition from asset allocation in portfolio construction, discuss the different types of asset allocation and how capital market assumptions are the foundational block. I also presented my ideas on the increasingly important topic of the financial implications of climate change by presenting a few highlights from my peer-reviewed research paper ‘Incorporating Climate Change in Asset Allocation and Portfolio Construction’, which has been accepted for publication in the forthcoming book titled ‘Climate Change: Managing the Financial Risk and Funding the Transition and Adaptation’, to be published by Risk.net in early 2022.