Asset Allocation: Investment Process: SAM Portfolios
Our five SAM Portfolios are managed by an experienced team of Certified Financial Analysts within Edge Asset Management, a subsidiary of Principal Global Investors. The Portfolios are constructed and managed according to a highly disciplined and dynamic three-step process:
Step 1: Setting long-term equity and fixed-income targets for each Portfolio.
Extensive research into risk and asset classes results in strategic decisions about each Portfolio's long-term equity and fixed-income policies for the constraints listed below. This research involves analyzing historical and projected risk, return, and correlation between asset classes. This step helps position the Portfolios to maximize returns at their assigned risk level.
Step 2: Developing a near-term investment outlook that determines how much risk each Portfolio should take.
Research into dozens of global and domestic market forces generates the Asset Allocation Team's outlook for the economy and capital markets. This view of investment conditions determines the Team's tactical decisions about each Portfolio's exact equity and fixed-income allocations. Here are just some of the criteria tracked for this step:
Step 3: Constructing each Portfolio's specific mix of asset classes.
The Team refines its tactical decisions by examining hundreds of possible Portfolio compositions. Combinations of equity styles, sectors, and capitalizations, as well as bond ratings and maturity structures, are analyzed before each Portfolio is built. The result is five distinctly different Portfolios that each diversify investor's assets across:
- More than 1,000 individual securities
- 12 to 15 separate asset classes
- Up to 14 mutual funds
Continuous Active Management
Once the Portfolios are constructed, the Team continually monitors and reallocates them to take advantage of changing investment conditions - unlike many funds-of-funds that are only periodically rebalanced to static models. The team also repeatedly test the Portfolios' structure by assessing how fund allocations and holdings affect performance. This dynamic process works toward optimizing the Portfolios for building long-term investment value.
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While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter covered and is provided with the understanding that The Principal® is not rendering legal, accounting, or tax advice. It is not a marketed opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements. For more information about our funds, including their full names, please see the Principal Funds, Inc. prospectus or call Customer Service at 1.800.222.5852.
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