The Wilshire Investment Process

Investors today have complex goals and objectives. Wilshire’s institutional approach translates the theoretical into the practical, making use of asset allocation technology and manager research experience that seeks to deliver attractive risk-adjusted returns.

Foresight


Asset Allocation

Our asset allocation process seeks to add value at the very beginning. Institutional consensus expectations are the first input into our asset allocation process, positioning our efficient frontier appropriately relative to sophisticated global investors. From there we add our own insights about shorter-term return opportunities across global capital markets, aiming to create an efficient frontier with higher expected returns at each level of risk.

Through the process of strategic asset allocation, investors may be able to not only obtain the long-term risk and return characteristics of various investment opportunities or asset classes, but also to utilize those asset classes to intelligently construct efficient portfolios. Institutional investors typically have a broad opportunity set of global investments and a long-term horizon, and so do we. However, when market conditions warrant, we employ opportunistic tilts to add further value.

 

Insight


Manager Research

Skilled investors know that a manager’s past performance does not predict their future results. To truly understand a manager’s skill requires the ability to strip out returns attributable to the market, style effects, and other factors embedded in their portfolio, which are not intended to be specific drivers of alpha based on their philosophy and process. For example, a major driver of a bottom-up stock pickers’ alpha should be stock selection, while a top-down macro manager should add value across sectors, countries, etc. Wilshire’s manager research process is designed to identify managers who have a consistent, repeatable, and sustainable ability to produce alpha on a forward-looking basis.

Quantitative Breadth/Qualitative Depth: Wilshire’s process begins with a large database of over 8,000 investment products that are screened based on quantitative factors to arrive at a short list of managers. Wilshire’s manager research team conducts in-person, telephone, and onsite meetings with investment managers on this list. In 2015, the team conducted approximately 1,200 meetings covering 1,600 strategies. The result is an evaluation based on six key factors:

  1. Organizational stability
  2. Information gathering
  3. Forecasting
  4. Portfolio construction
  5. Implementation
  6. Attribution

Portfolio Construction

Building a multi-manager portfolio is not simply a matter of choosing products with the highest alpha potential. The alpha of the managers, the correlation and risk among alphas, and the risk characteristics of the asset allocation benchmark all must be considered. Wilshire was an early practitioner of the technique of optimizing all these factors to produce an efficient combination of managers seeking to maximize expected return for each given level of risk.

Keeping an eye on performance: Wilshire employs a dedicated team of portfolio managers with the goal of making sure every portfolio is properly positioned to minimize unintended risks. Our institutional experience teaches us that the essence of investment management, after all, is the management of risks, not the management of returns.

 

Oversight


Ongoing Oversight and Monitoring

Wilshire frequently refines our market assumptions and reallocates the portfolios accordingly to maintain the optimal risk and return balance. Holdings and returns-based analyses are conducted on a quarterly and ad-hoc basis to monitor and assess each portfolio’s performance, risks, and positioning. Ongoing monitoring includes frequent meetings with each underlying fund’s investment management team. Wilshire’s role in the investment industry allows us to be amongst the first notified by investment managers of any organizational, investment team, or process changes—allowing us to make effective and timely decisions.

» View our Manager Research Process