The review lens

02. Constraints

Which tax, legal, regulatory, ethical, currency, concentration, spending, or ownership constraints should be visible in the framework? Which are binding and which are preferences?

01. Objectives

What is the capital intended to achieve? Is the priority purchasing-power preservation, future spending, a major obligation, long-term growth, or wealth transfer? Are there multiple objectives that should be separated?

04. Time horizon

Are there immediate, medium-term, and long-term horizons operating at the same time? What does each horizon imply for volatility, liquidity, and the ability to remain invested?

03. Liquidity

Which capital may be required in the near term? What cash flows, commitments, or contingencies should be considered before less-liquid exposures are evaluated?

04. Time horizon

Are there immediate, medium-term, and long-term horizons operating at the same time? What does each horizon imply for volatility, liquidity, and the ability to remain invested?

03. Liquidity

Which capital may be required in the near term? What cash flows, commitments, or contingencies should be considered before less-liquid exposures are evaluated?

Examine the portfolio structure

02. Diversification

Which risks are genuinely distinct? Which exposures may be driven by the same macroeconomic, factor, issuer, or liquidity risk? Correlation is a central determinant of portfolio risk; counting holdings alone is not enough.

01. Strategic allocation

What is the capital intended to achieve? Is the priority purchasing-power preservation, future spending, a major obligation, long-term growth, or wealth transfer? Are there multiple objectives that should be separated?

04. Time horizon

Are there immediate, medium-term, and long-term horizons operating at the same time? What does each horizon imply for volatility, liquidity, and the ability to remain invested?

03. Liquidity

Which capital may be required in the near term? What cash flows, commitments, or contingencies should be considered before less-liquid exposures are evaluated?

Further reading: CFA Institute — Portfolio Risk and Return, Part I

Questions to carry forward

• Which assumptions are explicit, and which are implicit?

• Who is responsible for each decision and review?

• What would cause the framework to be revisited?

• Which risks would be most difficult to tolerate in practice?

• Does the level of complexity improve understanding or obscure it?

• Which questions should be taken to the relevant professional or service provider?

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