From 72 Strategy Reports to 5 Awards: How a 36-Month Model Portfolio Reveals Consistent Allocation Skill
The methodology behind the Asset Allocation Awards, analysing 72 strategy reports over a 36-month horizon.
When the first Asset Allocation Awards were presented, the idea behind them was already several years old. Investors had been asking me the same question long before that: who is actually the best asset allocator?
When Alpha Research started analysing asset allocation reports from asset managers in 2012, the first Asset Allocation Consensus quickly emerged. By combining the views of dozens of strategists, it provides an overview of how the market as a whole is positioned.
For many investment committees, this is valuable information. Comparing a portfolio with the market consensus immediately shows whether it is positioned more defensively or more aggressively than the broader market.
But almost immediately a second question followed: if we know the consensus, which asset managers actually make the best allocation decisions?
Answering that question turned out to be more complicated than expected.
Measuring forecasts is harder than it looks
An asset allocation recommendation is not a simple buy or sell signal. Strategists typically work with relative positions such as overweight, neutral, or underweight. In addition, recommendations are made across different categories such as regions, sectors, or fixed income segments.
For that reason, in the early years I had many discussions with investors, CIOs and quantitative specialists about how allocation recommendations could be measured in a fair and consistent way. The objective was to develop a methodology that would be as objective as possible while remaining practical to implement.
This process ultimately led to the first Asset Allocation Awards in 2016.
Since then, the Awards have become an annual moment to review the quality of allocation recommendations from asset managers.
A growing universe of reports
When Alpha Research started collecting asset allocation publications, around forty reports were followed. Over time that universe gradually expanded.
By 2020 the number had grown to around fifty publications. In 2024 it reached sixty. Today Alpha Research analyses 72 asset allocation reports from international asset managers.
For investment committees this represents a large amount of information. At the same time, it creates a practical challenge: which reports are the most valuable to follow?
The Asset Allocation Awards aim to help answer that question.
How the model works
To make allocation recommendations measurable, Alpha Research translates the recommendations from asset allocation reports into model portfolios.
Within each category, five sub-asset classes are used, which are equally weighted in a neutral situation. The neutral benchmark therefore consists of a portfolio in which each sub-asset class has a weight of 20%.
When an asset manager recommends an overweight position in a sub-asset class, the weight is increased to 25%. When a position is underweight, the weight is reduced to 15%.
The portfolio is then normalised so that the total allocation always equals 100%, ensuring that no leverage is introduced. In this way, the model portfolio reflects the relative allocation view of an asset manager.
The performance of these model portfolios is then ranked and compared with the neutral allocation.
Within each category, an equal-weighted structure is deliberately used. The goal of the analysis is not to replicate the structure of the market, but to measure whether relative allocation decisions add value.
In a market-weighted index such as the MSCI ACWI, the United States currently represents roughly 60% of the index. As a result, allocation decisions regarding the US can dominate overall outcomes.
Using an equal-weighted structure ensures that smaller regions such as Japan or Emerging Markets play an equally important role in the analysis. This makes it easier to observe whether allocation recommendations for these segments add value.
The exact composition of sub-asset classes differs by category. In Regional Equities, for example, regions such as the United States, Europe, Japan and Emerging Markets are used, while in Fixed Income segments such as government bonds, investment grade, high yield and emerging market debt are included.
For a fair comparison, reports must contain a sufficient number of recommendations. Therefore, only categories with at least four out of five sub-asset classes receiving a clear allocation recommendation are included in the analysis. If a report contains too few recommendations, that category is excluded from the ranking.
Time horizon and consistency of the universe
The analysis is conducted over a 36-month period.
Asset allocation decisions often take time to be reflected in market performance. In the data tracked by Alpha Research, rankings over shorter periods tend to fluctuate more strongly. A three-year horizon therefore provides a more stable view of the quality of allocation recommendations.
During this period, changes in the universe of reports are also taken into account. If an asset manager stops publishing a report for an extended period, that report may be removed from the analysis. Conversely, new reports are only included once sufficient historical observations are available to allow for a meaningful comparison.
This approach helps ensure that rankings are based on consistent and comparable data.
Award categories
The Asset Allocation Awards are presented in five categories:
Asset Allocation
Regional Equities
Equity Sector Allocation
Fixed Income Allocation
Overall
The Equity Sector Allocation Award was introduced in 2017 and will be awarded for the tenth time this year. The other categories have now been running for eleven years.
Clarity and consistency of reports
In addition to performance, Alpha Research also evaluates the clarity and consistency of the reports themselves.
An allocation report must provide clear signals. Many asset managers use arrows, plus/minus signs or colour coding to indicate positions. This makes recommendations easy to interpret.
When recommendations are expressed only in text and require interpretation, it becomes more difficult to measure them consistently. In such cases a report may be excluded from the analysis.
The regularity of publication also matters. If a report does not appear for an extended period, its comparability with other publications may be affected.
From consensus to selection
The Asset Allocation Consensus shows how the market as a whole is positioned. That information is valuable, but it remains an average of many different views.
The Asset Allocation Awards add a second perspective. By measuring the quality of allocation recommendations over multiple years, a shortlist of asset managers with a demonstrated degree of consistency emerges.
For investors, this can help quickly identify which reports are worth following. In an environment where investment committees have access to dozens of strategy publications, this can result in a meaningful time saving. Instead of monitoring a large number of reports, investors can focus on a smaller group whose allocation recommendations have historically ranked well.
In the next article, we will look at which asset managers have been nominated for this year’s Asset Allocation Awards.