Our allocation process is based upon a methodology unique to CPR AM that was developed back in 1997
\nand is regularly upgraded by our investment and research teams. We call this our \u2018probability weighted
\nmulti-scenario approach\u2019. Prior to all investment decisions, and during CPR AM\u2019s asset allocation
\ncommittee, we develop several market scenarios which illustrate different views of the world over a
\nthree-month horizon. In doing this, we strive to extend our understanding of risk in order to better
\nanticipate future market trends. Our approach therefore takes into account additional risks (upward and
\ndownward) to counter the inherent drawbacks of a single scenario \u201cblack or white\u201d view – which
\nultimately aggravates any forecasting or diversification errors. This process, which includes monthly reviews, generates strong asset allocation decisions with the view to delivering regular outperformance
\nin all market conditions. <\/p>\n
Our forecasts are determined on a team basis and cover a wide range of asset classes within a global Improving consistency through modeling:<\/strong><\/p>\n CPR AM\u2019s balanced investment process is driven by a proprietary asset allocation model. The main data Far from restricting fund managers\u2019 convictions or room for manoeuvre, the use of models helps to Between two monthly asset allocation committees, the strategy is reviewed and\/or refined on a weekly Selecting instruments with care:<\/strong><\/p>\n At CPR AM, we focus on asset allocation as our main performance driver. The selection of instruments is Were we to select external funds, the strategy of the chosen fund manager may play against the desired While we primarily invest in \u201cbeta-one\u201d vehicles, we nevertheless pay particular attention to the choice From theory to practice:<\/strong><\/p>\n Of all investment biases, the most prominent is the \u201cnatural habitat\u201d bias \u2013 the domestic preference The crisis in the Eurozone provides an interesting case study. The average correlation between flexible![\"relative_performance_of_cpr_croissance_reactive.jpg\"](\"http:\/\/www.next-finance.net\/http:\/\/beta.next-finance.net\/wp-content\/uploads\/2015\/03\/relative_performance_of_cpr_croissance_reactive.jpg\")
<\/a><\/p>\n
\ninvestment universe. During CPR AM\u2019s asset allocation committee, all members of the team of fund
\nmanagers discuss their performance forecasts for each asset class and within each scenario. The
\ncombination of these \u201cvotes\u201d is then reviewed and debated by all attendees. Through these discussions,
\nwe eliminate each fund manager\u2019s potential biases (for instance, a preference for his\/her own asset
\nclass) very early on in the process. Beyond its democratic aspect, this way of working enables all
\nconcerned to discuss different points of view. It favours debate between different investment teams
\n(credit and equities, euro and global equity etc.) and improves the consistency of our forecasts. <\/p>\n
\ninputs are the forecasts issued by the asset allocation committee. This quantitative model will translate
\nthe fund managers\u2019 convictions into a consistent allocation through an optimisation process. This tool,
\nwhich is designed to be highly flexible, is able to adjust fully to different portfolio constraints. As a result,
\nour model delivers optimal asset allocation for every single fund, based both on the common forecasts
\nand on specific constraints. In this way, portfolio construction for all funds is driven by the same
\ninvestment principles, and is therefore not subject to the preferences of a given fund manager. In this
\ncontext, modeling is used as a safeguard that prevents the implementation of structural biases in a given
\nportfolio.<\/p>\n
\nimplement decisive investment choices in a disciplined and consistent manner. <\/p>\n
\nbasis to improve responsiveness. Here too, collegial decision-making is a key factor. <\/p>\n
\ntherefore conducted in a way that reflects our pre-determined asset allocation decisions as closely as
\npossible. We prefer to invest in \u201cpure\u201d instruments that are highly representative of their underlying
\nassets and offer strong liquidity. As a result, we primarily invest in ETFs, tracker funds or simple
\nderivatives (for instance, futures on equity indices). We believe this decision guarantees compliance with
\nallocation choices and prevents the implicit biases that can result from selecting active managers.<\/p>\n
\nasset allocation and reduce the potential added value.<\/p>\n
\nof instruments, bearing in mind that the quality of different index-based instruments may vary. In this
\nrespect, our asset allocation team has developed a proprietary tool dedicated to picking ETFs. <\/p>\n
\nwhich explains why fund managers allocate stronger exposures to their own country\/region due to
\nsuperior knowledge. Within an asset allocation fund, this bias can have a number of consequences: a
\nstructurally higher weight in a given geographical area, or a particularly dynamic steering of the portfolio
\non a given area for no obvious reason.<\/p>\n
\nbalanced funds and the Eurozone equity index is rather surprising. Not only is the correlation very high,
\nbut it is also relatively stable over time. CPR AM\u2019s approach has enabled us to limit these biases – and our
\nfunds have stood out within their European balanced peer group. Over the past few years, our exposure
\nto the Eurozone has been very dynamic and our portfolios have typically shown stronger resilience to
\nmarket turmoil (summer 2011, summer 2014, etc.). <\/p>\n<\/a><\/a>\n\t\t\t<\/div><\/figure>