A case can be made for integrated portfolios, says Savina Rizova, vice-president at Dimensional Fund Advisors. Speaking in the session ‘Putting It All Together: The Case For Integrated Portfolios,’ she said to create an integrated portfolio, the drivers of expected return must be identified. However, every month there is a new driver of return and many are unlikely to persist over time and are unlikely to re-occur. In an integrated portfolio, investors need to differentiate between those which will persist and those won’t. The portfolio is built around drivers which provide premiums. These premiums must be sensible and logical, persistent across time periods, pervasive across markets, robust to alternative applications, and cost effective to capture return in well diversified portfolios. These premiums include the market, size of the company, profitability, and expected future cash flow, she said.
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