Mass Customization of Asset Allocation

The digital transformation is creating a need for mass customization of tactical asset allocation. Asset managers publish tactical asset allocation qualitative views regularly. However, the construction of robust portfolios from such views at large scale is often over-simplified. We propose a robust framework that enables the industrialization of highly customized tactical asset allocation portfolios from a single set of investment views. Our framework links the conviction of investment views to the consumption of risk and derives the expected returns accordingly. We show that robust optimization brings the level of consistency required for full automation of portfolio construction. We also show how a factor-based risk model can provide the level of transparency necessary for the interpretability of the framework