The Importance of Strategic Asset Allocation

Lujer Santacruz
(School of Accounting, Economics and Finance, Faculty of Business and Law, University of Southern Queensland, Toowoomba QLD 4350, Australia)

Abstract: This paper examines the impact of strategic asset allocation on total returns of investment portfolios. It aims to confirm the results of previous studies using US investment data that found strategic asset allocation dominating the other investment decisions namely market timing and security selection. Using data from Australian managed funds, strategic asset allocation is found to account for most of the total returns in terms of magnitude and around 88% of the variability in total portfolio returns. Suggestions are made to expand the scope of the study to be able to generate more conclusive results.

Key words: asset allocation; performance attribution; financial planning

JEL codes: D14; D81; G11