A dynamic, forward-looking approach to asset allocation

farrelly’s Investment Strategy provides subscription and consulting tools and services to enable a dynamic, forward-looking approach to asset allocation, a key driver of quality portfolio construction and quality results for investors.

Established in 2004, farrelly’s Investment Strategy was the first independent, specialist asset allocation research service for investment advisory firms in Australia and New Zealand. It offers a web-based subscription service as well as consulting services, all grounded in a logical, client-focused, forward-looking risk and return forecasting framework based on a robust approach that has stood the test of time.

farrelly’s Investment Strategy will help you create robust portfolios compatible with how investors really think and what they really want.

 

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About Tim Farrelly

Established in 2004, farrelly’s was the first independent, specialist asset allocation research service for investment advisory firms in Australia and New Zealand.

Its founder, Tim Farrelly, brings a unique combination of analytics, understanding of financial markets, knowledge of capital market history and insight into the practical requirements of financial advisers.

Tim is a member of Portfolio Construction Forum’s core faculty of leading investment professionals, contributing to the Forum’s continuing education and certification programs.

Prior to founding farrelly’s, Tim was an Executive Director of Macquarie Bank Ltd, and Director of Macquarie Investment Management Ltd (MIML). At various times during his 14 years at Macquarie he sat on the MIML Asset Allocation and Risk Committees, and was responsible for distribution of the Bank’s products through third party financial planners and stockbrokers. Between 1981 and 1986, Tim was head of research for financial advisory firm, Monitor Money, where he was responsible for asset allocation and manager selection. He has an MBA (Distinction) from the Harvard Business School and a Bachelor of Engineering (Met) from the University of Melbourne, where he was awarded the J.Neill Greenwood Medal.

Who does it suit?

farrelly’s Investment Strategy is suited to portfolio construction practitioners - and in particular, investment advisers and financial advisory firms - which want to take a dynamic, forward-looking approach to asset allocation.

What makes it different?

farrelly’s Investment Strategy is compatible with how investors really think, and what they want - so the farrelly’s approach is based on five core beliefs.

Portfolios are constructed to meet investors’ needs - the first step in portfolio design is to work out what the client wants and needs to achieve. It’s not about asking clients their age or how aggressive they feel, so they can be squeezed into a preset box. The main driver should be meeting investors’ current and/or future cash flow needs with an acceptable level of certainty.

Risk is the chance of not meeting the investor’s needs - risk, like beauty, is in the eye of the beholder. farrelly’s believes it is best assessed from the investors’ perspective. The most important risk to any investor is rarely associated with a Greek letter - rather the key risk is poor, long-term, real returns resulting in insufficient cash flow to meet their needs. Excessive volatility is a secondary, albeit important risk. Tracking error or institutional business risk shouldn’t enter into the equation.

Return forecasts are long-term and forward-looking - in stark contrast to most of the industry, farrelly’s asset allocation models are based on long-term, forward-looking return forecasts for each asset class, using a robust approach that has stood the test of time. It breaks returns into three components of income, income growth and the effect of changing valuation ratios, and provides clear insights into long-term future returns which are infinitely more reliable than historical extrapolations.

There’s more than one way to skin the cat - portfolios don’t have to be theoretically perfect. Most of the time, there are many equally valid asset allocations to achieve the investor’s required outcome. While the asset allocation design must be underpinned by a set of rigorous principles and calculations, the final choice will come down to cost, risk, and personal preferences, to produce a portfolio that makes sense to the adviser and client.

Transaction costs and taxes matter - taxes and costs can consume half or more of total investment returns, so decisions to change asset allocations should take them into account, carefully weighing up the benefits.

What does it include?

Dynamic Asset Allocation Service (subscription)

farrelly’s Dynamic Asset Allocation Service is available by subscription, exclusively through PortfolioConstruction Forum.

The Dynamic Asset Allocation Service is a multi-faceted publication, updated quarterly in early March, June, September and December. It has five components.

Dynamic Asset Allocation Handbook - This 24-page Handbook features editorial exploring investment strategy “hot topics”, farrelly’s long-term forecasts for asset classes, a detailed review of the long-term forecasts for an individual asset class (rotating across asset classes each quarter), the farrelly’s Tipping Point Tables which show the current valuations of various markets (Cheap, Fair Value, Fully Priced, Overpriced) and three asset allocation models to assist with implementation:

  1.  A Directed approach - model asset allocations for those who believe asset allocation is best left to the experts and therefore want an exact model to follow;
  2.  an Advised approach - model asset allocation ranges, for those who prefer to leave portfolios alone for the most part, and make changes only when it is essential; and,
  3.  A Bespoke approach - benchmark asset allocation models for those who want to take control of the asset allocation process within a disciplined and logical framework.

Dynamic Asset Allocation Wizard - This simple-to-use Excel-based software is best suited to those using the farrelly’s Directed or Advised approach (see above). It enables subscribers to adapt the model asset allocations to create optimal portfolios for clients’ unique circumstances, automatically recommending how to place new money and what changes should be made to existing portfolios.

Dynamic Asset Allocation Implementor - This more advanced Excel-based software is best suited to subscribers using the farrelly’s Bespoke approach. It enables subscribers to adapt the benchmark asset allocations to individual client circumstances including:
- incorporating your own views on fees and fund manager value add into the return forecasts
- examining the impact of transaction costs on portfolio changes
- comparing your bespoke asset allocation models to finametrica risk profiles
- generating Monte Carlo simulations to project the range of possible returns from a portfolio
- exporting the data for use in other applications
- printing out a support document for inclusion in a Statement of Advice.

Dynamic Asset Allocation Presentation - This investor-friendly presentation includes a variety of slides that cover the basics of the farrelly’s philosophy (we don’t anticipate that you will use every slide with every client).

Dynamic Asset Allocation Profiler - A very simple tool that allows subscribers to determine clients’ financial risk tolerance and match that to the farrelly’s model asset allocations.

Consulting

farrelly’s also works on a fee-for-service basis with firms’ in-house staff to build an asset allocation process incorporating the firm’s preferred asset sectors, its beliefs and expectations about those sectors, and its thinking about risk and how to manage it. In addition, farrelly’s provides ongoing consulting input into advisory firms’ investment committees.

Subscribe now

farrelly’s Dynamic Asset Allocation Service is available by quarterly subscription, payable by credit card. Your subscription has no fixed period - it carries on until you cancel it, with the caveat that you must cancel before we send a quarterly update or the quarterly fee is payable.

We’ll email you each quarter (early March, June, September and December) to advise that the quarterly update is available, after which we process credit card payment and send you an invoice for your records.

To subscribe, please use the link below to send us your details.

Once the form has been received and processed, we will contact you via phone to obtain your credit card details. Please note that by using the link below to subscribe to farrelly’s, you agree you have read, understood and agree to be bound by the farrelly’s Investment Strategy Service Terms and Conditions.

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