Morningstar Direct - Asset Allocation

U.S.A.

Morningstar Direct
Our institutional investment analysis platform.


		Overview


		Who Uses Morningstar Direct


		Investment Analysis


		Asset Allocation


		Equity Portfolio Management


		Asset Flows


		Presentation Studio


		Reporting Solutions


		Data and Content

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Retirement Manager

Asset Allocation

Built on methodologies developed by Morningstar researchers, asset allocation in Morningstar Direct

gives investment professionals the flexibility to create optimal asset allocation policies for specific investment goals. To start with sound capital markets assumptions, users can choose a preferred model for developing their asset allocation inputs. Optimization techniques are similarly flexible, providing the option to use traditional mean-variance optimization (MVO) or different methods, as well as to replace standard metrics with others such as the geometric mean or conditional value at risk (CVaR). With these additional levels of control, investment professionals can build stronger assumptions to help reduce downside risk.

What you can do:

Develop asset allocation inputs

	Select from an extensive library of indexes
	Build expected return estimates using a choice of models
	Incorporate “fat-tail” assumptions

Asset allocation in Morningstar Direct helps build sound asset allocation strategies by starting with a reliable set of expectations for returns, risk, and correlations as inputs. Users can choose which model to apply when creating asset class assumptions, including historical, Black-Litterman, and more. For greater flexibility, users can model the behavior of their asset classes with either normal or non-normal distribution functions.

Apply preferred optimization techniques

	Replace standard optimization metrics to better meet investment goals
	Apply traditional or resampled mean-variance optimizations
	Simulate the probability of loss, returns, and more

With Morningstar Direct, users can adapt their optimizations to meet specific objectives, such as reducing the sensitivity to outliers or better revealing downside risk. The asset allocation functionality can run optimizations with the geometric mean for less sensitive, multi-period modeling. Users can substitute the risk metric of their choice for standard deviation, including conditional value at risk. In addition to traditional mean-variance optimization, Morningstar Direct offers a proprietary resampling technique that applies Monte Carlo-like simulations to capital markets assumptions, producing more diverse allocations.

Evaluate the impact of an asset allocation policy

	Identify how a strategic or tactical asset allocation policy affected performance
	View the outcome of deliberate deviations from policy weights
	Isolate fees from the analysis

Also known as “macro” or “balanced” attribution, total portfolio attribution offers a way to study the performance of portfolios based on an asset allocation policy implemented with multiple asset classes, investment mandates, and managers. Fees are isolated in the analysis, helping identify what investment consultants contributed relative to their cost.

Read a white paper on performance attribution for the total
portfolio