With Efficient Frontier, located under the Tools menu, you can create a target asset allocation for a client. This can be done by selecting an allocation directly from a point on the Efficient Frontier graph or by selecting a model asset allocation or model portfolio.
The Efficient Frontier graph displays a curved line representing the maximum expected return value of an asset mix (based on current market assumptions) for any given level of standard deviation. Standard deviation is plotted along the X (horizontal) axis. Expected return is plotted along the Y (vertical) axis. The vertical bands represent different risk tolerance levels.
When Efficient Frontier is selected, it opens to the client selection screen.
Place a checkmark in the box to Include Prospects in the list of available records.
Type in the name of a client in the Jump to record name field, or,
Use the scroll bar to move up and down the list to locate a client/prospect.
Click on the record to select it, then click OK.
Click Load Accounts to plot one or more of the client's accounts to the graph. The risk/return position of the client's accounts are plotted as red bull's-eyes.
To plot a model portfolio or asset allocation, click Load Model. The Find Portfolio or Asset Allocation dialog opens. Click on the name of the desired model and click OK. The model is plotted as a blue square.
To remove models from the graph, click Clear Models.
To save the selected asset allocation as a model, click Save as Model. The Asset Allocation Profile dialog box opens. Enter a name for the model allocation and click OK. The model is saved to the Workspace area.
Click Constraints to specify constraints on the asset allocation.
Use the drop-down menu associated with the Market Assumption to change the market assumptions being used.
Click Set Target to set the selected point on the Efficient Frontier (a red dot) as the target allocation (a green bull's-eye).
Click Show Asset Classes to plot all the asset classes on the efficient frontier graph. Mouse over the points on the graph to view the names of the asset classes.
Click Hide Asset Classes to remove asset classes from the graph.
Click Find to plot a specific expected return or standard deviation value on the graph.
Use the + and - buttons under the Expected Return graph or move the slider to change the standard deviation. The red dot moves along the line and the values for the selected portfolio change.
Click Create PDF to generate an Efficient Frontier Report for the client.
See Also
About Ibbotson Model Asset Allocations