Asset Allocation

Asset Allocation Optimisation
What is Asset Allocation?
A strategy that apportions investments to different classes of assets
It aims to balance risk and return
The three main asset classes usually considered are:

Equities
Fixedincome and Cash
Alternate investments (like gold/property etc.)
Each asset class has a different level of risk and return, so each will behave
differently over time
All ti is
Allocation
i done
d
according
di to
t an individual's
i di id l' financial
fi
i l goals,
l risk
i k tolerance
t l
and
d
investment horizon
Mutual Funds Investments are subject to market risks, read all scheme related document carefully.
For any queries contact our Customer Service : 1800 425 5425 (Toll Free No).
Advantages of Asset Allocation
It is tough to predict which asset class will perform well at what time hence
allocating across different asset classes is a sensible approach of investment
Asset Allocation reduces the risk of the portfolio without hurting the long term
returns
Asset allocation is recommended for all investors with varying risk preferences
It can be used as part of a broader strategy of financial planning
Types of Asset Allocation

Strategic
g
Tactical
Is done after factoring market changes &

investors financial objectives
Is an allocation based on current market and economic

scenario & allocation changes on regular basis
Regular
R l risk
i k profiling
fili
& asset allocation
ll
i
review not required
M k
& financial
fi
i l objectives
bj i
change
h
d
dramatically
i ll over
Markets
investors horizon period hence allocations need to change
The assumption is that markets & asset

j
over a p
period of time,, hence
classes adjust
there is no need for an adjustment
A dynamic & adjusting investment decision works in favour

of the investor
Performance may not be as good as an

allocation with continuous monitoring
Equity
Fixed Income
Alternatives
Regular review & adjustments in Asset allocation helps in

making better portfolio decisions
It enables exploitation of better market & product
opportunities
Equity
10%
Fixed Income
10%
45%
50%
40%
Alternatives
45%
Investment Needs and Objectives
I am an investor
looking for growing
my wealth in the
longterm
i
investments0
t
t0
I am looking to
invest my life
savings for getting
regular cash flows
after retirement.
I am investing for my
childs education. I
am looking for
investments with
minimum
i i
risk
ik
I am young and
want to take risks. I
want to invest
where I can make
high returns.
Recommendations
Since you are a conservative investor it is recommended to have a
higher exposure in debt and capital protected assets as your
priority seems to be capital protection and not maximization of
funds.
You are also a conservative investor as you have a definite goal
that you would want to achieve. But your investments are long
term in nature.
As you want to grow investments taking measured risks to
achieve your objectives, you are a moderate investor. It is
recommended to have a well balanced exposure in equity and
debt.
As you are an aggressive investor it is recommended that you
have maximum exposure in equities as your risk appetite is more
and your target is on maximization of returns
Investor Risk Preference
Conservative
A conservative investor would predominantly have a higher
exposure in debt and capital protected asset classes, as his/her
priority
i it iis capital
it l protection
t ti and
d nott maximization
i i ti off ffunds.
d
Moderate
A moderate investor would have a well balanced exposure to
both equity and debt.
Aggressive
An aggressive investor would have maximum exposure to
equity as his/her risk appetite is more.
Risk Vs Return
Small and
Mid Cap
Equity
Funds
Exp
pected
Retturns
Aggressive
Asset
Allocation
Moderate
Asset
Allocation
Corporate
Bond
Funds
Conservative
A
Asset
Allocation
Large Cap
Equity Funds/
Dynamic Bond
Funds
Gilt Funds
Short
Term/Liquid
Funds
Risk
Different asset classes have different risks and returns. Usually taking higher risk
would fetch higher returns but by using asset allocation, one can achieve higher
returns with lower risks.
Modeling Factors
Past Performance
Expected Macro Variables (GDP, Inflation etc.)
Earnings Per Share
Interest Rates
Investors views
Allocations based on optimized levels
Limits on each category
Scope of Asset Class Categories
Fixed Income
Bond funds
Short-term
Long-Term
L
T
Equity
Equity Funds
Large
Mid and
d Small
S
ll
Sectoral/Themat
ic
Alternate Asset
Class
Gold
Execution
Mutual Funds can be used for implementing the allocation
Asset rebalancing is to be done on a regular basis when market conditions

change
Tactical allocation tool can be used by the investors to rebalance their

portfolio based on the market conditions
This rebalancing of asset classes on a periodic basis ensures allocations are

in tune with market/economic conditions
Flow of the Model
Overall Flow of the Asset Allocation Tool
Risk profiling of the investor
Suggested Allocation
Customization based on views
Final Report
Online Purchase
Risk Profile Questionnaire
Click this link if you know your risk

preference and want to choose it
directlyy instead of going
g g through
g a
questionnaire
Click on the right arrow to go

through a questionnaire to figure
out your risk preference.
preference
There will be eight questions and it would take about two minutes to answer the same
Risk Profile Questionnaire
Click on Submit button to view

your asset allocation report
Click on the left arrow or the numbers below to

review your answers to the risk profiling questions
Choose your own risk preference
Select your risk preference directly if you

know it.
After selecting
Aft
l ti risk
i k preference
f
click
li k
submit to view the allocation report
Suggested Allocation Report
Your risk
preference and
views
SSuggested
t d
allocations to
the asset classes
Suggested Allocation Report: Funds
Click here to
input your
current
allocation and
to view
modified
allocations
Print this report for

your perusal
Customise the allocation based

on your views on the market
Click on the
buy button
against the
fund to
purchase a
fund online
Customisation of Allocation
Change your
risk
i k preference
f
Input your
view on
Inflation
Input your view on

the economic
growth
h
Fund Allocation With Existing Investments
Click here to
update your
allocation
based on your
existing
portfolio
Enter your existing allocation

against each asset class
Online Purchase
Choose the
folio number
i which
in
hi h you
want to buy
the fund
Click on the Buy Now button to be

redirected to online purchase form
Thank You
Mutual Funds Investments are subject to market risks,

risks read all scheme related document carefully
carefully.
Appendix: Tactical Models Used
Efficient frontier for various risk & return scenarios
Mean Variance Optimization with BlackLitterman model & MonteCarlo

Simulation (Resampling)
Economic factors used for getting parameters for optimization
Time series analysis to link economic factors and asset class performance
Investor/Advisors views for inputs
Disclaimer
The Asset Allocation module is to assist investors to understand the allocation in different asset class on the basis of various
criteria. Investors may please note that planning of investment and taking investment decision might require professional
advise, therefore investors are advised to consult their financial / investment advisor before taking any decision of
investment. The data generated herein is completely and solely based on the information/details provided by you in
response to the questions specified. These questions and the calculations are developed and are based on predetermined
presumptions/assumptions Such information and the resultant data is provided only for user's convenience and information
presumptions/assumptions.
purposes. SBI Mutual Fund does not guarantee accuracy, completeness or correct sequence of any the details provided
therein and therefore no reliance should be placed by the user for any purpose whatsoever on the information contained /
data generated herein or on its completeness / accuracy. The use of any information set out is entirely at the User's own risk.
User should exercise due care and caution (including obtaining of advise of tax/ legal/ accounting/ financial/ other
professionals)
f i
l ) prior
i to
t taking
t ki off any decision,
d ii
acting
ti or omitting
itti to
t act,
t on the
th basis
b i off the
th information
i f
ti contained
t i d / data
d t
generated herein.
Investors should also note that SBI Mutual Fund has neither done a detailed risk profiling of the investor or nor has taken into
consideration the investors portfolio of investment and various other factors which may be necessary for rendering
investment advise. The views should not construed as complete investment advise. SBI Mutual Fund does not undertake any
li bilit
liability
or responsibility
ibilit
t
to
update
d t
any data.
d t
N thi
Nothing
contained
t i d herein
h i
shall
h ll amountt to
t
an
offer, invitation, advertisement, promotion or sponsor of any product or services. The use of this information is subject to the
terms and conditions governing such products, services and offers. The information contained / data generated herein may
be subject to change, updation, revision, verification and amendment without notice. The views constitute only the opinion
and do not constitute any guidelines / recommendations on any course of action to be followed by the investors. The view is
not meant to serve as a professional
f i
l guide
id for
f the
h investors
i
Allll recipients
i i
off this
hi material
i l should
h ld seekk appropriate
i
professional advice and carefully read the scheme information document/ statement of additional information and before
dealing and or transacting in any of the products referred to in this material make their own investigation. The Fund, the
AMC and Trustees and any of its directors, officers, employees and other personnel shall not liable for any loss, damage of
any nature, including but not limited to direct, indirect, punitive, special, exemplary, consequential, as also any loss of profit
in any way arising from the use of this material in any manner whatsoever. The recipient alone shall be fully responsible/are
/
liable for any decision taken on the basis of this material.

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Asset Allocation Optimisation

What is Asset Allocation?

A strategy that apportions investments to different classes of assets

It aims to balance risk and return

The three main asset classes usually considered are:

Advantages of Asset Allocation

It can be used as part of a broader strategy of financial planning

Types of Asset Allocation

Is done after factoring market changes &

Is an allocation based on current market and economic

The assumption is that markets & asset

A dynamic & adjusting investment decision works in favour

Performance may not be as good as an

Regular review & adjustments in Asset allocation helps in

Investment Needs and Objectives

Investor Risk Preference

Expected Macro Variables (GDP, Inflation etc.)

Earnings Per Share

Allocations based on optimized levels

Limits on each category

Scope of Asset Class Categories

Mutual Funds can be used for implementing the allocation

Asset rebalancing is to be done on a regular basis when market conditions

Tactical allocation tool can be used by the investors to rebalance their

This rebalancing of asset classes on a periodic basis ensures allocations are

Flow of the Model

Overall Flow of the Asset Allocation Tool

Risk profiling of the investor

Customization based on views

Risk Profile Questionnaire

Click this link if you know your risk

Click on the right arrow to go

Risk Profile Questionnaire

Click on Submit button to view

Click on the left arrow or the numbers below to

Choose your own risk preference

Select your risk preference directly if you

Suggested Allocation Report

Suggested Allocation Report: Funds

Print this report for

Customise the allocation based

Input your view on

Fund Allocation With Existing Investments

Enter your existing allocation

Click on the Buy Now button to be

Mutual Funds Investments are subject to market risks,

Appendix: Tactical Models Used

Efficient frontier for various risk & return scenarios

Mean Variance Optimization with BlackLitterman model & MonteCarlo

Economic factors used for getting parameters for optimization

Investor/Advisors views for inputs

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