Adaptive Asset Allocation

ADAM BUTLER, CFA, is CEO of ReSolve Asset Management, a firm that specializes in ETF managed portfolio solutions for global asset allocation. Adam has over twelve years of experience in investment management, and is primarily responsible for investment research and asset allocation. He is also the lead author for the GestaltU blog.MICHAEL PHILBRICK, CIM®, is President of ReSolve Asset Management. He has over twenty years of experience in investment management, contributes to ReSolve’s blogs and research, and is responsible for investment decisions, coaching, and strategic leadership.RODRIGO GORDILLO, CIM®, is Managing Partner of ReSolve Asset Management. He has ten years of experience in investment management, contributes to ReSolve’s blogs and research, and is responsible for investment decisions and business development.

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• Acknowledgments xiPART I THE PHILOSOPHY OF SUCCESSFUL INVESTING 1CHAPTER 1 The Most Important Concepts in Wealth Management 5CHAPTER 2 The Narrative Is Reality 11CHAPTER 3 Tightly Grouped Arrows Nowhere Near the Bull’s-eye 15CHAPTER 4 What Is Gestalt? 19CHAPTER 5 Measuring the Relative Value of Portfolios 23CHAPTER 6 The Whole Is Greater than the Sum of Its Parts 27CHAPTER 7 Our Process Is a Financial Gestalt 29PART II SAVING AND WITHDRAWING FROM PORTFOLIOS 31CHAPTER 8 Beware of Those Pesky “Volatility Gremlins” 33CHAPTER 9 It’s Not Just the Destination, It’s Also the Journey 37CHAPTER 10 In a Perfect World 39CHAPTER 11 Home on the Range 41CHAPTER 12 Timing Is Everything 43CHAPTER 13 Longevity Risk 47CHAPTER 14 Plan for the Worst, Hope for the Best 49CHAPTER 15 Sequence of Returns for Savers 53CHAPTER 16 Individual Rate of Return for Savers 57CHAPTER 17 Sequence of Returns for Retirees 59CHAPTER 18 Do You Feel Lucky? 63PART III CURRENT HIGH VALUATIONS MEAN LOWER FUTURE RETURNS 65CHAPTER 19 A Simple Model to Forecast Equity Market Returns 67CHAPTER 20 Implied Future Returns over the Next 20 Years 73CHAPTER 21 How Do We Do It? 75CHAPTER 22 Forecasts 80 Percent More Accurate than Always Assuming Long-Term Averages 81CHAPTER 23 Roller Coasters Are for Amusement Parks 83CHAPTER 24 The Last Five Years Have Been a Triumph for the Ostriches 87PART IV AN INVESTMENT FRAMEWORK FOR STABILITY, GROWTH, AND MAXIMUM INCOME 89CHAPTER 25 A Word about Asset Allocation 91CHAPTER 26 The Optimization Machine 93CHAPTER 27 Garbage In, Garbage Out 95CHAPTER 28 All We Know Is That We Know Nothing 103CHAPTER 29 If We Know How Assets Should Behave 107CHAPTER 30 A Structurally Diverse Investment Universe 119CHAPTER 31 If We Can Estimate Volatility 121CHAPTER 32 If We Can Estimate Volatility and Correlation 125CHAPTER 33 If We Can Estimate Volatility, Correlations, and Returns 129CHAPTER 34 Summary of the Optimization Machine 133CHAPTER 35 Building to Adaptive Asset Allocation 135CHAPTER 36 Integration of Adaptive Asset Allocation 141PART V WHY YOU SHOULD TRUST THE RESEARCH 145CHAPTER 37 The Usefulness and Uselessness of Backtests 147CHAPTER 38 Tactical Alpha and the Quantitative Case for Active Asset Allocation 155CHAPTER 39 Sensitivity of Safe Withdrawal Rates to Longevity, Market, and Failure Risk Preferences with Implications for Asset Allocation 181CHAPTER 40 Winning by Not Losing. Or, Bootstrapping to Estimate Risk 203Final Thoughts 207Bibliography 209Index 213