Our Approach to Asset Allocation
Traditional Asset Allocation programs allocate assets across all asset classes in an attempt to smooth out returns in different market conditions and then take a static, set-it-and-forget-it approach.  However, it is our opinion that in reality, this is little more than an exercise in “planned mediocrity.” 

Our Adaptive Leadership system identifies leadership in terms of stock market asset classes according to Style (Growth vs. Value) and Size (Small-cap, Mid-cap & Large-cap). The key question is which of the six classes will outperform in the current environment? 

One of the most important aspects of our research is that we have identified factors that have led to class outperformance over time.  This is not the typical rear-view mirror strategy (i.e. buying the class that was last month’s winner).  Although there are never any guarantees, our research shows the indicators below have proved to be excellent guides to which class is likely to outperform in a given environment:

How Does it Work?
The Adaptive Leadership Strategy is designed to focus on the leading asset classes over intermediate-term and long-term time frames.  Each week we review our models to determine the leading class in terms of Style and Size.  Based on our target exposure for each portfolio, one-third of the exposure is allocated to the leading index in terms of Cap Size (Small-cap, Mid-cap or Large-cap).  One-third is allocated to the leading Style and Size Class (Small-cap Growth, Small-cap Value, Mid-cap Growth, Mid-cap Value, Large-cap Growth, and Large-cap Value) for the intermediate term and the final one-third is allocated to the long-term Style and Size leader.

In sum, while there are never any guarantees in investing, HCM’s Adaptive Leadership Strategy for Asset Allocation is designed to keep portfolios focused on Market Leadership at all times, in all market conditions.