Beyond Bulls & Bears


Alternative Allocations: Asset allocation, portfolio construction and goals-based investing

In the latest episode of our Alternative Allocations podcast, Franklin Templeton Institute’s Tony Davidow discusses asset allocation and portfolio construction with Aaron Filbeck, Managing Director of the Chartered Alternative Investment Analyst Association.

In the latest episode of our Alternative Allocations podcast series, I discussed asset allocation and portfolio construction with Aaron Filbeck, Managing Director of the Chartered Alternative Investment Analyst Association (CAIA) and Head of UniFi by CAIA™. Aaron and I discussed the merits of advisors adopting a goals-based investing approach to align their portfolios with specific outcomes.

We talked about the need to communicate with clients in a more clear and concise fashion, and how framing the discussion based on what we are solving for is more constructive than falling into the trap of chasing returns. This approach also helps in establishing more realistic expectations and moves the discussion beyond trying to outperform the market.

The aim of asset allocation should be to allocate capital appropriately to improve a client’s chances of achieving their goals. High-net-worth families are often simultaneously solving for multiple goals, with different time horizons. Consequently, the families’ asset allocation may vary from one account type to the next (personal accounts, retirement accounts, trust accounts, etc.).

As Aaron stated, “They’re thinking about retirement or saving for college or trying to get through retirement or maybe multigenerational wealth. So, there are a lot of non-financial objectives and goals that clients are trying to accomplish.” He went on to encourage us to speak in terms that clients understand “. . . it’s important for us as a profession to speak that language a little bit more and try to translate this very technical and often complex field into something that’s a little bit more understandable for those clients and relate the portfolio to the purpose behind it.”

From a portfolio construction perspective, we discussed the need to carefully evaluate a fund, its liquidity provisions, underlying investments and risk-return tradeoffs. Aaron discussed product evolution, and the importance of considering the fund structure. “Fund structure and the ability to access some of these strategies has grown in terms of how you access them. It’s no longer a binary decision between a regulated mutual fund and a long lockup drawdown fund. There’s a lot of different flavors that are in between.”

With the dramatic changes in the alternative investment landscape, and the rapid product proliferation, we discussed the importance of advisor education, and the need to help clients make better informed decisions.

To learn more about opportunities in asset allocation and portfolio construction within a goals-based framework, please visit To listen to this episode and others, please visit

Resource: The cost of being too liquid white paper


All investments involve risks, including possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested. Past performance does not guarantee future results.

Investments in many alternative investment strategies are complex and speculative, entail significant risk and should not be considered a complete investment program. Depending on the product invested in, an investment in alternative strategies may provide for only limited liquidity and is suitable only for persons who can afford to lose the entire amount of their investment. An investment strategy focused primarily on privately held companies presents certain challenges and involves incremental risks as opposed to investments in public companies, such as dealing with the lack of available information about these companies as well as their general lack of liquidity. Diversification does not guarantee a profit or protect against a loss.

Risks of investing in real estate investments include but are not limited to fluctuations in lease occupancy rates and operating expenses, variations in rental schedules, which in turn may be adversely affected by local, state, national or international economic conditions. Such conditions may be impacted by the supply and demand for real estate properties, zoning laws, rent control laws, real property taxes, the availability and costs of financing, and environmental laws. Furthermore, investments in real estate are also impacted by market disruptions caused by regional concerns, political upheaval, sovereign debt crises, and uninsured losses (generally from catastrophic events such as earthquakes, floods and wars). Investments in real estate related securities, such as asset-backed or mortgage-backed securities are subject to prepayment and extension risks.

An investment in private securities (such as private equity or private credit) or vehicles which invest in them, should be viewed as illiquid and may require a long-term commitment with no certainty of return. The value of and return on such investments will vary due to, among other things, changes in market rates of interest, general economic conditions, economic conditions in particular industries, the condition of financial markets and the financial condition of the issuers of the investments. There also can be no assurance that companies will list their securities on a securities exchange, as such, the lack of an established, liquid secondary market for some investments may have an adverse effect on the market value of those investments and on an investor’s ability to dispose of them at a favorable time or price.


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