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Strategic Tilting around the SAA Benchmark

In: Interest Rate Models, Asset Allocation and Quantitative Techniques for Central Banks and Sovereign Wealth Funds

Author

Listed:
  • Aaron Drew
  • Richard Frogley
  • Tore Hayward
  • Rishab Sethi

Abstract

Long-run mean reversion in asset market returns is one of a set of core ‘investment beliefs’ of the Guardians of the New Zealand Superannuation Fund (NZSF). These beliefs underpin the investment strategies of the Fund. In this chapter, we present a dynamic portfolio asset allocation strategy that we call ‘strategic tilting’ which aims at exploiting the mean reversion process in asset markets. It is one of a set of portfolio strategies that the NZSF regards as a source of additional value over market returns. Strategic tilting involves adjusting (or tilting) exposures to broad asset classes around their benchmark weights in the strategic asset allocation (SAA) according to their relative return prospects.

Suggested Citation

  • Aaron Drew & Richard Frogley & Tore Hayward & Rishab Sethi, 2010. "Strategic Tilting around the SAA Benchmark," Palgrave Macmillan Books, in: Arjan B. Berkelaar & Joachim Coche & Ken Nyholm (ed.), Interest Rate Models, Asset Allocation and Quantitative Techniques for Central Banks and Sovereign Wealth Funds, chapter 10, pages 189-206, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-25129-8_10
    DOI: 10.1057/9780230251298_10
    as

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