Definition
SAA sets the baseline allocation across asset classes (equities, bonds, alternatives, cash) based on long-term capital market assumptions and investor objectives. It is the most important investment decision, driving 90%+ of return variation. SAA is typically reviewed annually or when investor circumstances change, with tactical adjustments made within bands.
lightbulb Example
An endowment's SAA: 40% global equity, 15% private equity, 15% real assets, 15% hedge funds, 10% bonds, 5% cash. Bands of ±5% allow tactical flexibility. Annual review reconfirms or adjusts based on updated capital market assumptions.
verified_user Key Points
- Most important investment decision
- Drives 90%+ of portfolio return variation
- Based on long-term capital market assumptions
- Reviewed annually or when circumstances change