MD Physician Services Inc. Chief Investment Officer William Horton Jr., CFA, appeared on BNN’s Market Sense to discuss how MD’s tactical asset allocation process is used to both look for return and manage risk in MD funds and pools, which are engineered exclusively for the benefit of MD's physician clients.
In a segment entitled “A Contrarian View,” Mr. Horton provided insight into MD’s June tactical asset allocation decision—which reduces holdings in equity and shifts exposure in the funds and pools away from short-term fixed income and towards longer-term fixed income. This tactical move was undertaken by MD in the context of portfolio risk management, and in response to the need to manage the sensitivity of the funds and pools to potential changes in short- and long-term interest rates. MD’s increased allocation to longer-term fixed income is moderated by other tilts in the portfolio structure, such as an increased allocation to cash.
At MD, investors benefit from a combination of tactical and strategic asset allocation across the portfolios. To implement tactical asset allocation, tactical decisions, made at least quarterly, are overlaid on the strategic asset allocations that support each of the portfolios. The tactical decisions are carried out within a defined range and “risk budget,” or the amount of risk allowed for each portfolio. Each risk budget is calibrated to correspond to the strategic time horizon of the portfolio.
To watch the June 21 interview, click here. Please note that it may take 15-30 seconds for the video to appear on the page. Video is available in English only. You can also learn more about MD’s June tactical asset allocation decision here.