Asset Allocation

Strategic vs. tactical allocation

• Strategic allocation — the long-term target weights set in the IPS. The default exposure the portfolio holds when no view is being expressed.
• Tactical allocation — short- to medium-term tilts away from the strategic weights to capture market views. Tactical positions should be bounded by IPS-defined ranges.

What an IPS allocation specifies

1. Target weights for each asset class.
2. Allowable bands around each target (e.g., equity target 60%, range 50-70%).
3. Rebalancing triggers — what causes a return to target.
4. Tactical authority — how far the advisor may tilt away from strategic weights.
5. Constraints — restricted assets, ESG exclusions, concentrated-position carve-outs.

Common asset-class buckets

• Equities — domestic, international, emerging, with size and style sub-categories.
• Fixed income — government, corporate, high-yield, municipal, with duration sub-categories.
• Alternatives — private equity, private credit, hedge funds, real estate.
• Cash and equivalents — short-duration Treasury, money market.
• Real assets — commodities, infrastructure, REITs.

Allocation and compliance

Examiners look at whether the actual portfolio matches the documented strategic allocation, and whether deviations are explained. Persistent portfolio drift outside the IPS bands without explanation is a recurring deficiency. The discipline is continuous monitoring and documented decisions when drift occurs.

How StratiFi thinks about asset allocation

Allocation is the most important number on the page. The firms that hold up under examination treat the IPS allocation as the standard the portfolio is judged against — not aspirational, not flexible. When the portfolio drifts outside the bands, the response is documented (rebalance, exception with client consent, IPS update) rather than ignored.