Asset allocation is one of the key determinants of investment return and risk. The goal of asset allocation is to match assets to objectives in a manner that provides goal oriented return potential and risk control. BHK considers two types of asset allocation strategies. The first and foremost is Strategic Asset Allocation. Secondarily, BHK focuses on Tactical Asset Allocation.

Strategic Asset Allocation

• Long-term focus and blueprint for the overall investment strategy.
• BHK uses a proprietary model to match investment assets to future liabilities - Asset/Liability Modeling
• BHK also considers elements of Modern Portfolio Theory (MPT) in recommending asset classes and investment management styles for investment

Tactical Asset Allocation

• Consider current investment environment, outlook and valuation of asset classes
• Recommend over and under weighting asset classes and investment management styles around the Strategic Allocation

Asset/Liability Modeling

BHK principals began over a decade ago to develop a proprietary model of matching client assets to client liabilities in an effort to maximize return within client acceptable risk parameters. The process attempts to match short-term liabilities (cash flow needs) with assets appropriate for short-term investment time horizon. Intermediate term investment assets are matched to intermediate-term liabilities and long-term assets with long-term liabilities.  The process includes developing a yearly asset term structure and consideration of appropriate asset classes to match each year. The result is a laddering of investment time risk. Different risk profiles are assigned to assets needed at different times in the future. This innovative approach has generated significant interest among investors as a way of designing a goal oriented asset allocation. Of course, asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns.