The FSFP Approach to Asset Allocation

Studies have shown that asset allocation is a key determinant of portfolio performance.  At Five Seasons,  we believe that effective asset allocation derives from a consideration of as many diverse asset classes as possible.  Not every asset class should be represented in every portfolio in every market environment, but in general we feel that the use of a wide and disparate array of investments results in portfolios with superior risk-return profiles.

At Five Seasons, we take a long-term approach to asset allocation.  We believe that the efficacy of a particular portfolio's design can only be determined over a period of years, not months.  Furthermore, as students of market history we believe risk and return characteristics that various asset classes have exhibited in the past are useful guideposts in designing portfolios for the future.

Investment-related expenses can be very harmful to the performance of a portfolio, especially over long time periods.  Consequently, when we decide which asset classes to include in a given portfolio, we are mindful that cost-effective and liquid investment vehicles must be available.  At Five Seasons, we tend to prefer asset classes that can be represented by exchange-traded or index funds.  Actively managed funds and individual securities can be useful additions to a portfolio, but only if they offer performance or diversification otherwise unavailable at lower cost.

At Five Seasons, we feel that asset allocation should be an ongoing, fluid process.  Because risk-return profiles of different asset classes vary over time, allocations to those asset classes should also vary as market conditions change.  Since we believe that the returns of asset classes tend to be cyclical over periods of years, we tend to be somewhat contrarian in our approach to portfolio design.

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