The process starts with a “core” portfolio of stocks and bonds that allows for tactical moves and cost-effective rebalancing. Then we add alternative strategies that offer a range of benefits, such as inflation protection, enhanced income, volatility management, and hedging of unusual risks. This approach to portfolio management is often used by pension funds and endowments, and is nicknamed the “Endowment Model.”
For a complete description of our approach, please see Blending Alpha and Beta: Building a Mini-Endowment. This article includes a detailed portfolio illustration, and was chosen as an Editor’s Pick on SeekingAlpha.com.