Redmayne Bentley partners with the University of Leeds to create innovative asset allocation modelling tool

Redmayne Bentley has partnered with academics from the University of Leeds’ Business School (LUBS) and the University’s School of Mathematics to build an innovative stochastic asset allocation modelling tool to make forecasts around the risks and returns of investments.

James Andrews, Director - Head of Investment Management at Redmayne Bentley, said:

“Traditionally, stochastic modelling tools are used by institutional advisers and pension funds, but we wanted to bring an institutional tool into our investment process for the benefit of all our clients, be they in our Model Portfolio Service or our Bespoke Discretionary and Advisory Services.”

The tool was created in partnership with Dr Iain Clacher, Associate Professor in Accounting & Finance and Pro Dean for International at LUBS and Dr Graham Murphy, Senior Teaching Fellow in the School of Mathematics. 

Dr Clacher said: “We were delighted when Redmayne Bentley approached us about collaborating on this project. Hearing their brief, developing the tool, and refining it together shows what can happen when universities and business work together.”

Dr Murphy said: “This system provides Redmayne Bentley with a practical, efficient tool to support their investment decision-making. While one cannot predict how the stock market will perform in the future on the basis of past performance, this tool draws on historic data to produce statistically-informed forecasts which help to support the investment decision-making process.”

The portfolio risk tool model uses 20 years of past data to measure correlations between asset classes and incorporate long term market volatility. The tool also breaks down risk of a portfolio by each constituent asset class providing an insight into what drives risk within portfolios.

Sometimes asset allocation decisions can be marginal calls from a performance perspective, however the tool allows Redmayne Bentley’s Strategic Asset Allocation Committee to model variations of asset allocations to help identify the optimal choice.  

James said: “This is where the tool comes into its own, it helps us visualise most or all of the potential outcomes to have a better idea regarding the risk of a decision.”

This tool provides sound, data-driven forecasting, that can be tailored to clients’ individual portfolio risk strategy.

James added: “The tool ties in with our ethos of ensuring that every decision we take is for the benefit of the client, bearing in mind the unique backgrounds, circumstances, aspirations and capacity and appetite for risk.

“The asset allocation modelling tool is a bespoke offering for our private clients. It has enabled us to solidify our asset allocation strategy by developing a more academically rigorous approach to portfolio construction decisions.”