Asset allocation

At Fathom Financial Consulting, we do not believe there is one 'correct' method of asset allocation. Instead, we consider the investor's judgement as at least as important as the quantitative input. Our range of models and tools are designed to help investors think about asset allocation in a way that is consistent with underlying economic scenarios.

Fathom’s objective is to integrate its economic analysis with practical asset allocation advice. Our distinctive combination of economic scenario-based analysis, quantitative rigour and easy-to-use bespoke modelling software has proved a winning combination for our clients and our own model portfolio. Fundamental relationships matter, we strongly believe that a thorough understanding of the economic environment can help improve asset allocation decisions, both strategic and tactical.

• Quantitative rigour: we have built a number of models that generate the risk and return inputs required for asset allocation from well-defined economic scenarios.

• Cutting-edge: we incorporate the latest developments in asset allocation theory and risk analysis into our models. And in particular, we build on careful academic analysis of when and why asset pricing deviates from the efficient markets norm, such as the concept of long-horizon predicatability, developed by Campbell, Shiller, Cochrane and others.

• Underlying consistency: since asset returns are not normally distributed we take great care to generate return distributions that are skewed and fat-tailed in all of our work. We use of normal mixture distributions when combining our underlying economic scenarios to generate non-normal distributions of future asset returns. These future return distributions are presented in the form of fan charts, and we use moments of these distributions - means, variances, skews and kurtosis (fat-tailedness) - as inputs to our optimisers. We achieve consistency between our underlying economic forecasts and the risk/return profile of future returns in generating our optimal portfolios.

Click here to see some examples of our asset allocation work; or if you would like to discuss a specific asset allocation project, please contact us at enquiries@fathom-consulting.com or call +44 (0)207 796 9561.