Investment Plus: About: Scenarios

ECONOMIC SCENARIOS
Begin by setting assumptions for the asset classes to be included in the Portfolio Optimization. Up to 29 asset classes can be considered. Investment Plus makes it easy to prepare a set of asset class assumptions to be used in the Portfolio Optimization. Frontier provides up-to-date default estimates for all of the major categories of investments. Or, you can develop your own assumptions for other asset classes.

The Historical Returns Database included with the Investment Plus can be used to help formulate these assumptions. Each set of assumptions can be stored as an Economic Scenario. There is no limit on the number of Economic Scenarios you can have.

ASSET CLASSES The asset classes that you use can be, for example, a generic investment category, mutual fund, money management style, or money manager. For each asset class, estimates are made concerning:

Return/Risk/Correlation. These assumptions can either be a single fixed average estimate, or a variable year-by-year forecast.
Fees/Taxes. Include assumptions for management fees, income and capital gains taxes, and buy/sell transactions costs.
Nominal/Real Basis. Enter the assumptions for the Asset Classes either unadjusted for inflation or after-inflation.

Investment Plus has the flexibility to accommodate all types of holding constraints. After creating an Economic Scenario, holding constraints can be applied which act to limit the results of the Portfolio Optimization.

ASSET CLASS CONSTRAINTS
Individual minimum and maximum constraints can be applied to each asset class.

GROUP (Sector) CONSTRAINTS
Constraints can be entered which cover a number of asset classes. For instance, you may want to limit all of the equity asset classes to no more than 70% of the total portfolio.

PORTFOLIO CONSTRAINTS
These constraints are used to place limits on the minimum return or yield, or maximum risk, of the portfolio. You may want to identify portfolios which generate income of at least 5%.

SPECIAL CONSTRAINTS
A unique type of constraint will allow you to specify intra-sector limits where, for example, small stocks cannot represent more than 30% of the total allocation to equities.