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Adaptive Valuation Strategies is our own distinctive strategic asset allocation methodology, which we use to customize a long-term investment plan for you.
By assembling an appropriate mix of equities, fixed income, cash, and other asset classes, you can potentially enhance your core portfolio’s returns and help manage risk.
Adaptive Valuation Strategies (AVS) is Citi Private Bank’s own distinctive strategic asset allocation methodology, which is built upon key principles from our Investment Philosophy.
AVS’s aim is to maximize your returns given the amount of risk you are willing to take.
Our investment process therefore begins by gaining an understanding of your return goals, risk tolerance, and your liquidity, geographic, and currency preferences.
We then customize a long-term plan – or strategic asset allocation – to pursue your goals.
AVS has five levels of allocation according to how much risk you are willing to take on.
Having established an appropriate long-term plan for you, we make tactical adjustments to it, based on the outlook for the next 12 to 18 months.
We can then implement your allocation by building you a core portfolio, using strategies from our own discretionary managers and third-party managers, as well as capital markets strategies.
The long-term plan we create for you highlights what we believe to be the optimal course for pursuing your investment goals in your core portfolio.
BUILT ON SOLID INVESTMENT PRINCIPLES
It is built upon principles established through academic research and proven in practice, and which help form our Investment Philosophy.
These include global multi-asset class diversification, the discipline of regular portfolio rebalancing, and staying fully invested for the long term.
FORWARD-LOOKING RETURNS
SREs are based on valuations and other fundamentals.
When an asset class valuation is expensive or cheap compared to its long-term average, AVS lowers or raises its SRE respectively.
This is because low valuations have tended to give way to high subsequent returns and high valuations to low returns.
A lower SRE will likely lead AVS to recommend a smaller allocation to an asset class, and a higher SRE to a larger allocation.
SPECIALIZED TREATMENT OF RISK
Traditional asset allocation methodologies have often failed to anticipate the frequency and severity of such losses.
AVS therefore uses a specialized measure of risk called Extreme Downside Risk (EDR), which draws upon many decades of asset class history to highlight the risks you may face.
There is a close relationship between SREs and EDRs: higher returns come with higher risks attached.
Steven heads our Global Strategy team which formulates our macro investment views across all regions and asset classes. He chairs our Global Investment Committee, which sets our tactical asset allocation, the basis for discretionary portfolios we manage for clients.
As Chief Economist, Steven provides detailed macroeconomic analyses to inform portfolio decisions.
Previously, Steven was Head of Economics for US institutional equities at Citi Investment Research. He advised the firm’s institutional and government clients globally on macroeconomic developments, forecasts and policy analysis.
He was also economic advisor to the Morgan Stanley Smith Barney Global Investment Committee and a voting member of predecessor Asset Allocation Committees at Salomon Smith Barney.
Steven has a master’s in quantitative economics from the Zicklin School of Business, Bernard M. Baruch College, City University of New York
OUTLOOK
The global economy has “broken the rules” by growing despite usually reliable recession signals.
We believe this expansion can continue in 2025 and 2026 despite likely geopolitical discord, creating upside potential for financial markets.
For ultra-high-net-worth individuals and their family offices, we make the case for broadening portfolio horizons: embracing all the asset classes set out in their long-term investment plans.
Access our insights covering major asset classes and our favored markets, including those impacted by powerful long-term forces such as the artificial intelligence (AI) revolution.
The Private Bank exists to serve a very special community. Hear the stories of global citizens in their own words.
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