AllocationMaster™: About

Portfolio Optimization
At the heart of AllocationMaster is its powerful portfolio optimizer. The complex mathematics of Modern Portfolio Theory are contained in AllocationMaster. However, no special technical skills are required. The program makes these concepts usable by the average investment advisor. AllocationMaster uses the advanced mathematics of Modern Portfolio Theory to identify efficient portfolios in less than one second! The program uses the same time-tested Nobel-prize winning approach first developed by Harry Markowitz over 40 years ago.

Holding Limits
The use of holding limitations allows you to tailor the program to produce only feasible results. That is, you can limit the range of portfolios shown to only those that the client will consider for investment. There are many uses for applying holding limitations. They may be used to drop an asset class from the analysis; to lock-in a non-repositionable client holding; to always maintain a minimum allocation; or to limit the maximum exposure to an asset class.

Portfolio Calculations
The model computes the optimal combinations of asset classes which maximize return at each risk level. Portfolios are identified along the entire risk spectrum from very conservative to very aggressive, subject to the holding limitations.

The results are tailored to the client's tax situation. Separate tax treatment is considered for the client's non-qualified (taxable) assets, qualified (tax-deferred) assets, and variable annuity assets in developing the portfolios.

In addition, you can specify your own portfolios. This is useful for illustrating other hypothetical portfolios, and to round the portfolio percentages or dollar allocations to even amounts.

Portfolio Characteristics
AllocationMaster gives you a full description of the client's current portfolio and any proposed alternative portfolios. The dollar and percentage composition of each portfolio is shown separately and in side-by-side comparisons using enhanced graphics. Clearly see the required rebalancing in an Action Plan.

The before- and after-tax projected rates of return, risk (standard deviation), and Sharpe ratio can be interactively displayed for any portfolio. The returns can also be shown gross and net of fees.

And, use the historical returns database in AllocationMaster to backtest the portfolios. This can help answer the question, "How would the portfolio have performed historically?"