StashAway’s Economic Regime-based Asset Allocation (“ERAA”) framework builds and manages portfolios by targeting different levels of risk and attempting to maximize net investment returns at each risk-point.
The framework is dynamic and strategic in nature, and it is built on 3 pillars: (i) Economic Regimes, (ii) Risk Shield and (iii) Valuation Adjustments.
The First Pillar (Economic Regime) is at the core of ERAA’s portfolio construction logic, and uses economic data to adjust the target strategic asset allocation at each risk level. The main assumption behind this pillar is that the economy ultimately drives medium term markets’ returns.
The Second Pillar (Risk Shield) is the risk management layer of the framework, tasks with identifying cases in which economic data either are unclear or are not driving market behaviour. When the Risk Shield’s thresholds are breached, ERAA immediately recommends adjusting portfolio composition to an All-Weather strategy, with the target of protecting capital during unpredictable times.
The Third Pillar (Valuation Adjustments) takes into account each asset class’ valuation to under-weigh overvalued assets and discover opportunities to over-weigh undervalued assets. Valuation Adjustments are based on economic regressions, and therefore are anchored around ERAA’s main assumption that the economy ultimately drives medium term markets’ returns.
If you want to know more about ERAA read our white paper on StashAway’s investment framework.
StashAway Management (DIFC) Limited is regulated by the DFSA (license number F006312) for the provision of arranging custody, arranging deals in investments, advising on financial products, and managing assets, with a retail endorsement.
StashAway Management (DIFC) Limited (registration number CL 3982) is established in the DIFC pursuant to the DIFC Companies Law. Its registered address is Unit 1301, Level 13, Emirates Financial Towers, P.O. Box 507051, Dubai International Financial Centre, Dubai, United Arab Emirates.