Asset Allocation
Asset allocation is the split of a portfolio across stocks, bonds, cash, and alternatives — the decision that usually dwarfs manager selection.
Definition
Asset Allocation refers to the decision that usually dwarfs manager selection. Keep that definition fixed when comparing series, managers, or regimes — renaming the same tape does not create a new signal.
Why it matters
It shows up in factor research, attribution, and capacity debates — whether a return slice is skill, style, or fee drag. When the decision that usually dwarfs manager selection shifts, related hedges, limits, and narratives usually need an explicit update rather than a quiet assumption.
Case
Suppose a desk is positioned for the opposite of what asset allocation is saying. If the decision that usually dwarfs manager selection moves against that book, the first question is not “is the story clever?” but whether size, hedges, and stop logic still match the observation.
How to read it
Check definition stability across universes, costs, and regimes before treating a backtest as portable. Prefer a short written null hypothesis for Asset Allocation: what would falsify the current reading in the next window?