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.
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 2012, the team conducted over
1,700 such meetings. The result is an evaluation based on six key factors:
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.
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
This material is intended for informational purposes only and should not be construed as legal, accounting, tax, investment, or other professional advice; nor is it a recommendation or solicitation to purchase or sell any security or to adopt any specific investment strategy. This material represents the current opinion of Wilshire and is subject to change without notice. Information herein which has been obtained from third parties is based on sources believed to be reliable. Wilshire Funds Management does not represent that such information is accurate. Statistical data contained herein is as of the dates noted and such information should not be relied on or be the basis for an investment decision. Past performance is not indicative of future results. Investing involves risk including loss of principal.