MODEL DELIVERY:
Portfolio management, powered by QuantStreet.
What's the problem with typical asset allocation models?
Many large asset managers offer model portfolios intended to direct capital into their own products. While the models are “free,” the underlying ETFs often have significant fees. Frequently, these models are viewed as commodities, use static strategies, and make little effort to add value through dynamic asset allocation.
QuantStreet's solution.
We use the latest advances in data science, machine learning, and financial economics to create a dynamic asset allocation process that responds to changing market conditions. While investors pay a fee for our models, we select funds that balance low fees (whenever possible) with liquidity. Since we have no economic relationships with the underlying fund managers, we select only funds that are right for our clients.
A unique approach to asset allocation.
Let’s consider the asset allocation landscape. Many large asset managers offer model portfolios at no cost to investors. Why? Because their models are intended to direct capital into their own financial products. The models are technically “free,” but they often invest in ETFs and other financial products that are run by the asset manager providing the models. The underlying products often have significant fees. Moreover, since managers are incentivized to use their own financial products, they may not choose the optimal investment vehicles from an investor’s perspective.
A related problem is that large asset managers tend to treat model portfolios as a commodity. They make little effort to add value through dynamic asset allocation and use static portfolios that don’t respond to tactical opportunities.
QuantStreet is different. Our clients receive rigorously-constructed dynamic portfolios that respond to changing market conditions. Our models invest in ETFs that are low cost (whenever possible) and liquid. Since we are completely independent and have no financial incentive to use one ETF over another, our only consideration is to identify the most liquid and lowest cost investments for our clients. We also believe in the value of tactical asset allocation — that’s why dynamic asset allocation is at the heart of our investing process.
The QuantStreet Difference
QuantStreet adds value through asset allocation. Clients benefit from the latest advances in data science, machine learning, and financial economics, which we use to create active asset allocation strategies. Our strategies respond to changing investment opportunities and evolving market conditions. While investors pay a fee for our model portfolios, we only select funds that are right for our clients. The funds we invest in must be liquid and we use low-fee funds whenever possible.
We have no economic relationships with the funds in which we invest. Our incentive is to choose funds that are right for our clients. Our incentives and our clients’ incentives are, therefore, aligned.
What models does QuantStreet offer? QuantStreet offers tactical and strategic model portfolios at a range of risk levels. Our model portfolios allow our clients to implement an ETF-based asset allocation strategy based on a QuantStreet’s proprietary machine learning process.
What will you receive each month? Each month, you’ll receive our latest model portfolios at a range of risk levels, from conservative to aggressive. Once you identify your own client’s risk preference, you will have a suitable model portfolio that can be customized by your investment team to fit the client’s specific needs. QuantStreet’s model portfolios can be used for the asset allocation component of your strategy, or they can serve as a full OCIO-style solution.
We’re a phone call away. Each month, we’ll share the rationale for our investment decisions, so you can explain them to your own clients. If you have questions, our CIO is just a phone call away.
Benefits of Model Portfolios
1. More time for client relationship building, business development, and work-life balance.
2. Peace of mind knowing that your clients are invested based on an academically rigorous and disciplined approach.
3. Multiple risk levels to meet individualized client needs.
4. Access to two sets of portfolios – Strategic and Tactical – allowing you to customize portfolio turnover to client needs.
5. Regular market analysis and commentary that empower you to explain the investing strategies to your clients.
6. More robust and sophisticated investing solutions than advisers can offer on their own.
7. Training for your wealth advisers on how to best use QuantStreet’s model portfolios to address clients needs.
8. Direct access to QuantStreet’s CIO for in-depth economic and market analysis.
Technology and data are changing everything. How about your investments?
To help you manage your own clients’ portfolios in a rigorous and analytically consistent manner, QuantStreet offers a model portfolio subscription service. Our models are implemented using highly liquid, low-cost exchange traded funds (ETFs). On a monthly basis, subscribers receive two sets of ETF-based model portfolios:
Strategic portfolios reflect long-term risk-return tradeoffs in the market. These portfolio change slowly over time.
Tactical portfolios are designed using QuantStreet’s proprietary machine learning forecasting model. These react dynamically to changing market conditions and have monthly turnover between 5-15%.
Both sets of portfolios reflect concentration and other position limits (e.g., the investment grade allocation can’t be higher than 50% of the U.S. Treasury allocation) which are customizable to user requirements. We can work with subscribers to customize the model portfolios to their specific use cases.
Passive allocation is a good starting point, but it fails to recognize that some assets are more or less attractive at different points in the economic cycle. We solve this problem through an active portfolio construction approach. First, we use a machine learning algorithm to forecast asset class returns. Then, we construct portfolios based on those forecasts to match client risk preferences. Our models are adaptive and change over time as economic and market conditions evolve
Service Options
Options
Base portfolios
Tactical portfolios
Written explanation of investing rationale
Market and economic analysis
Quarterly call with CIO
Custom portfolios for specific client needs
Basic
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Standard
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Advanced
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*QuantStreet offers pricing on a sliding scale depending on end-user AUM.
Fees
Basic
Inquire about pricing*
Base portfolios
Tactical portfolios
Written analysis of investing rationale
Standard
Inquire about pricing*
Base portfolios
Tactical portfolios
Written analysis of investing rationale
Quarterly call with CIO
Advanced
Inquire about pricing*
Base portfolios
Tactical portfolios
Written analysis of investing rationale
Quarterly call with CIO
Custom portfolio analysis for specific client needs
Pricing for each service depends on clients’ assets under management.
Our Investing Process
Algorithmically generated using economic and market data
Qualitative analysis
Portfolio Implementation
We invest primarily using ETFs (exchange traded funds). ETFs have a number of key benefits:
ETFs are low cost and highly diversified. Purchasing a single ETF can be like buying hundreds or thousands of individual stocks and bonds.
Our ETF providers are leading global asset managers (Vanguard, BlackRock, State Street, etc.).
Our asset classes include US stocks, international and emerging market stocks, US government and corporate bonds, and real estate investment trusts.
We also invest in value and momentum ETFs.
- Value is a strategy that involves buying stocks with relatively attractive valuations.
- Momentum involves buying past winning stocks, and avoiding past losing stocks.
ETFs are highly liquid. They allow us to dynamically reposition the portfolio in response to changing market conditions and opportunities, at low cost to our clients.
We do not use leverage or short-selling in our investments.
Sample Portfolio
In this sample portfolio, the assets offering the most attractive reward/risk tradeoffs are S&P 500 stocks, value stocks, high-yield bonds, and an ETF tracking real estate investment trusts.
The portfolio can also maintain some amount of cash, in this case 2.5% of portfolio value.
The portfolio is highly diversified and owns thousands of individual securities via the ETFs.
We rebalance your investment portfolio regularly.
Portfolio weights change over time to reflect changing opportunities and risks.
Assets with zero current allocation may have allocations in the future.
For technical details of our strategy, which are most relevant to professional investors, please visit our strategy in-depth page.