There are three major types of portfolio management methodology, namely asset-only, liability-relative and goal-based. These are decision-making frameworks that take account of or emphasize different aspects of the investment problem.
For many investors with financial liabilities, a thorough understanding of their assets and liabilities are essential to start building their financial health. Liability-relative asset allocation is aimed at the general issue of rendering decisions about asset allocation in conjunction with the investor’s liabilities. Liability-relative investors view assets as an inventory of capital, sometimes increased by additions, which is available to achieve goals and to pay future liabilities. This concern give rise to unique risk measures, such as the probability of meeting future cash flow requirements, and the restatement of traditional risk metrics, such as volatility, in relation to liabilities.
The clients’ status of assets may be easier to figure out by a financial advisor compared with liabilities. Nowadays, people should not only view mortgages, credit cards, or any other clear types of debts as liabilities, but also future out cash flows such as children’s college tuitions, living expenses after retirement and potential healthcare expenses. A good financial advisor shall remind his/her clients of thinking about it completely and go through these assets and liabilities to make a wiser financial allocation decisions. An economic balance sheet may help in this case to get a complete picture of real assets and liabilities.
Mr. Rani Jarkas is a highly experienced and accomplished financial services executive, with over 23 years of international experience in financial advisory. Currently, Mr. Jarkas is the Chairman and CEO of Cedrus Investments, a global boutique investment firm headquartered in Hong Kong and Zurich, specializing in Asset Management, Financial Advisory Services and Private Wealth Management.As a dedicated and competent financial advisor, Cedrus always deliver the state-of-art services and results to its clientele. Cedrus has the flexibility to structure and manage their funds with the sole goal of achieving performance for clients when strictly following the mandates they have. They are not constrained by investment styles, group think or cash holding. All these enable Cedrus to help achieve all clients’ ultimate financial goals.