December 3, 2012
We published the following article on the practical approach to implementing global tactical asset allocation (GTAA) at a pension fund manager Alberta Investment Management Corp. Full text is available at SSRN.
Global Tactical Asset Allocation for Institutional Investment Management
Leo de Bever, Ph.D.
Jagdeep Singh Bachher, Ph.D.
Roman Chuyan, CFA
Ashby Monk, Ph.D.
The Alberta Investment Management Corporation (AIMCo) was established in 2008 to manage approximately C$70 billion on behalf of 26 pension, endowment, and government reserve funds in the Province of Alberta. The fund’s over-arching goal is to earn incremental return on risk over what our clients could achieve by passively implementing their policy asset mix with equity and fixed income index funds. One way to add return in excess of passive portfolios is through our Global Tactical Asset Allocation (GTAA) strategy.
Success in this domain, however, is not easy to achieve in practice. It requires four key ingredients: 1) a team with the skill to identify the relatively more attractive asset classes opportunities; 2) clean position and valuation data running on robust business information systems; 3) clear accountability for strategy implementation; and 4) it requires timely management feedback though accurate and robust performance attribution.
In this brief note, we provide a description of the ways in which AIMCo has developed and executed its GTAA process over the past few years, focusing our discussion along the four key themes highlighted above. In so doing, we offer our views for other institutional investors that are considering or preparing to launch similar GTAA or tilting policies. We conclude that executing a successful GTAA requires developing world-class talent, systems, process and governance.