We must take a multi-factor approach to analysing funds – including ESG, Quality, Size, amongst others – to ensure portfolios reflect the investor's longer-term philosophy and/or shorter term views.

When constructing investment portfolios, one of the first questions is the objective - generally, the desired return. But ES investors have a dual investment objective. So which takes precedence?

If on 1 Jan 2020, I’d thought we’d see US unemployment head to 20%, China’s first quarter real GDP growth at -10% and the global economy shut down, I wouldn't have picked the S&P PE Ratio would now be above its long-term average since the GFC.

We must fully understand a fund’s performance to achieve best practice portfolio construction and recommend client solutions that truly reflect their investment beliefs and avoid unwanted biases.

Over the years, I've seen countless portfolios. Virtually all have had a pre-defined asset allocation aligned to a risk profile. But occasionally, that's where the alignment ended.

Asset allocation is often regarded as the most important portfolio decision, with asset classes then populated by investments. But this two-step approach can an asset allocation and investment selection mismatch.

The concept of diversification may seem to be second nature. However, some of its fundamentals are often misused and sometimes misrepresented.

Do you know the impacts of the risk characteristics of your multi-manager portfolio? Better portfolio construction occurs when you don't diversify the risk you are trying to capture. Beware the benchmark hugger - it might be you?

Using a Stage 4 investment analysis framework is a strong move towards a deeper understanding of portfolio risk drivers, and ensuring portfolios better reflect your investment philosophy.

This paper revisits the relationship between economic growth and equity market returns. Much of the literature has focused on the US so this analysis includes Australia and the UK, too.

Using a simple case study, this paper illustrates an approach to cutting through fund performance "noise" to find the signal - the bigger picture investment view that enables us to construct better investment portfolios.

Too often when analysing investments, the focus is on pure performance over too short a timeframe. We must lengthen the timeframe and adjust for risks, before we can begin to know whether value has truly been added.

Many have spoken of the significant risks funds carry with Australian equities exposures. So I thought I'd check the evidence on the influence of equities on multi-asset portfolios.

One might argue that Australia's high dividend yield, currently lower PE Ratio and generally smaller companies means the Australian equity market behaves like a global small cap with a value style tilt. Is that true?

Very few believe that past prices can tell you something about the future but there is a somewhat remarkable consistency to the trend of the Australian equity market returns over the last 45 years.

There's a widely held belief that in order to create alpha, a fund manager needs to make meaningful bets away from the market. But is this the reality? Does greater non-market risk actually produce higher alpha?

Between 15 and 30 years ago, there were several studies into the importance of asset allocation. Is asset allocation still important today, and in the Australian fund context? How successful is active management?

The typical approach to portfolio construction in the world of financial planning is a two-step process encompassing asset allocation and investment selection. It is the second step where a major flaw exists.

Real return investing isn't too real at all, with big targets like CPI+5%. It is an objective that is not strongly linked to the reality of investment markets - so prepare for another investment approach aligned with disappointment.

Portfolio construction should focus on three risk buckets – beta, smart beta, and alpha. If not, you run the risk of creating a poorly diversified (that is, over diversified) portfolio – and, worse, a portfolio that costs far more than it should.