Strategy
A strategy sets the desired allocation for your portfolio. It lets you track if your portfolio allocation follows the plan and run portfolio rebalancing. A strategy can be:
Shared or portfolio-specific. You can define a strategy per portfolio or reuse it in multiple portfolios.
Based on asset types or on a model portfolio. Asset types allow you to allocate investments by geographical areas, industry, or types of holdings like stocks or bonds. A model portfolio represents a basket of investments (to learn more about how to create a model portfolio, see Model portfolio window)
Regular or interpolated. Regular strategy is based on the dates and shares that you entered. For example, you can set a strategy that is valid from 01.01.2022 and contains 20% of a certain asset type. Then, you can raise the asset type share, for example, to 22% starting from 01.03.2023, and so on. Interpolated strategy is based on the shares on the start and end date of the period. The system calculates the values between the dates to create a gradual change that occurs on business days. For example, if you want to reduce investments in a particular sector from 30% to 20% over 5 years, you can enter two dates and specify the start and end shares. The values in between the dates will be calculated automatically.
A portfolio can contain multiple strategies, for example, for asset allocation, geographical allocation, and industrial allocation. However, only one strategy is allowed if you use interpolation.
Create a strategy
To set up a strategy for your portfolio:
Make sure you have allocations and model portfolio information in place:
If your strategy is based on the asset types, make sure you allocated your securities with asset classes and types (see Security window). The list of asset types is pre-configured in the system and you can create your own ones in Preferences (see Preference - Securities).
If your strategy is based on a model portfolio, create an asset type based on your model portfolio in Preference → Securities: add an asset group and asset type and choose the model portfolio in the Linked model portfolio field.
Define a strategy for your portfolio in the Portfolio window → Strategy tab. Add the date from which the strategy is valid and specify the minimum and maximum percentage for each asset type. The total percentage must sum up to 100%.
You can set up an interpolated strategy that changes gradually between the dates – for example, if you want to reduce investments in a particular sector from 30% to 20% over 5 years, you can enter two dates and specify the start and end share percentage. The values in between the dates will be calculated automatically. For details about strategy settings in the Portfolio window, see Strategy).
Reuse a strategy in other portfolios
Once you created a strategy for one portfolio, you can reuse it by linking it to other portfolios:
For the portfolio to which you want to link the strategy, open Portfolio window → Strategy tab.
Choose the source portfolio in the Strategy from portfolio field, then choose the asset group. The content of the strategy is shown. Note that if the strategy is updated in the source portfolio, changes will be applied to this portfolio strategy as well.
Save the changes.
Compare portfolio allocation to a strategy
Once you set up a strategy, you can track if your portfolio follows it:
Analyze if your portfolio allocation follows the strategy and check for strategy breaches that require action. To do this, set up limits based on strategy in Preference → Portfolios → Limit definitions, link the limit group to the portfolio in the Portfolio window, Limits tab. This feature is available only for regular non-interpolated strategy. For detailed instruction, see Limit definitions based on strategy, investment plan or model portfolio.
Compare the portfolio performance to the strategy. Open Strategy analyzer to view the portfolio data next to the strategy figures in a table. To learn more, see Strategy analyzer.
Make a long-term analysis of portfolio allocation against the strategy in Drift Tracker. This feature is available only for regular non-interpolated strategy. To learn more, see Analyze and monitor portfolios' drift.