Amigos Finserv in association with world renowned research house Morningstar presents Model Portfolios using mutual funds.

The Model Portfolios are specifically designed for those investors who want their monies to be invested in mutual funds for an expected outcome over short, medium or long-term time horizons given one of their risk profiles – Defensive, Cautious, Balanced, Growth or Adventurous.

Morningstar, Inc., incorporated in 1984, headquartered in Chicago, USA, listed on NASDAQ and with operations in 27 countries, is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individual investors, financial advisors, asset managers, retirement plan providers and sponsors, and institutional investors in the private capital markets.

Morningstar provides data and research insights on a wide range of investment offerings, including managed investment products, publicly listed companies, private capital markets, and real-time global market data. Morningstar also offers investment management services through its investment advisory subsidiaries.

We unite the strengths of Morningstar Inc.'s independent investment research, data, and tools with over three decades of their investment experience to help us empower investors to meet their financial objectives.

Model Portfolios are drawn on core capabilities in asset allocation, manager selection and portfolio construction.

Asset Class Summary

The asset classes covered in the Model Portfolios are listed in the below:


1.       Domestic Equity

·         Large Cap Equity

·         Midcap Equity

·         Small cap Equity


1.1   International Equity (covered/evaluated)

·   US Equity

·   European Equity

·   Asia Ex-Japan Equity


2.       Domestic Fixed Income

·         Long Term Government Bond

·         Medium Term Government Bond

·         Short Term Government Bond

·         Cash


3.       Alternative Assets

·         Gold


 The Morningstar Model Portfolio investment process can be summarized into series of steps, each of which involves careful consideration and the application of various models and concepts that have been extensively researched and tested through practical implementation.

-          Capital Market Assumptions (CMA)

o   Identify opportunity set of asset classes.

o   Estimate Intermediate and Long Term:

§  Expected returns

§  Standard deviations

§  Skewness

§  Kurtosis

§  Correlations

o   Production of Conditional forecasts for 10-year and 20-year horizons which are specific to a current market environment and Unconditional forecasts which are independent of a given market environment and are used for longer investment horizon.

o   Usage of building block approach to forecast asset class returns.

 -          Strategic Asset Allocation (SAA)

o   SAA is both a process and a result. It focuses on how to invest assets to maximise the probability of achieving one's goal at an appropriate level of risk. It is the process of determining target allocations to the available asset classes.

o   Optimisation identifies asset mixes that are efficient in terms of return as a measure of reward for a given level of risk.

o   Morningstar deploys the following optimization techniques for strategic asset allocation:

§  Mean variance optimization

§  Re-sampled mean variance optimization

§  Mean conditional value at risk

 -          Manager selection - Rating process

o   Morningstar assesses fund managers based on how they believe they will perform in future over an economic cycle, against both peers and accepted benchmarks.

o   Research Universe - Pre-meeting analysis - Manager review - Post review analysis & draft report - Ratings committee - Final report.

o   The Morningstar Analyst Rating is the final outcome of the above process based on site visit, manager questionnaire, quantitative and holdings-based analysis of the portfolio and an assessment of all the key issues.

o   Managers are rated on a five-point scale ranging from Gold, Silver, Bronze, Neutral and Negative.

o   The model recognises managers that are open and transparent, have a well-run investment process and importantly, are good fiduciaries of investors' monies.

 -          Manager selection – White list of funds

o   Morningstar believes that in-depth qualitative analysis that is tested and informed by quantitative analysis, lies at the heart of successful fund research.

§  Qualitative Analysis

·         Parent – Structure, Organisation, Culture, Regulatory

·         People – Experience, Depth, Continuity, Incentives

·         Process – Investment approach, Capacity

·         Performance – Historical performance

·         Price – Fees & charges

§  Quantitative Analysis

·         Historical alphas relative to benchmark

·         Style consistency

·         Excess returns

 -          Portfolio Construction

o   Three broad disciplines are employed – Asset allocation, Fund selection, and Portfolio construction to give Model Portfolios the highest probability of achieving their stated objectives.

§  The process of portfolio construction begins with bringing together the asset allocation proposition and the fund manager selection.

§  It considers the following key components: Concentration Risk, Diversification and Flexibility.

§  It evaluates stock overlap and return correlation between funds, Style box placement, and how funds' sector exposures complement those of other funds within the overall model for which the fund is being selected.

§  The number of funds in each portfolio is carefully considered resulting in approximately 8-12 underlying funds.

§  As per our experience, 5% - 15% weight to an individual fund is considered to be an acceptable range for impacting portfolio returns and is essential for diversification.

-          Monitor

o   To ensure that a portfolio remains aligned with its specified strategic asset allocation target, each portfolio is consistently monitored, reviewed and periodically re-balanced.

§  Varying market conditions can cause a portfolio to stray from its annual targeted strategic asset allocation.

§  Capital Market Assumptions are reviewed on an annual basis to account for changes in the market conditions.

§  Based on the revised CMAs, model portfolios are also reviewed and updated on an annual basis.

§  Regular interaction with the fund management team is an integral part of the manager review process. The fund ratings are reviewed on an annual basis or can be event driven.

§  Portfolio constituents are monitored on a regular basis during quarterly assessments and qualitative evaluation are reviewed once a year.

§  Construction and ongoing monitoring of the portfolios are done using a team-based approach.

 For any further information/ clarification or if you want to know more and schedule a no obligation meeting please do get in touch via contact details mentioned below.

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