June 30, 2025

All investors face capital-market risk. Managing that risk, evaluating opportunities in the context of an investor’s goals, and assessing specific investments efficiently requires broad, objective, close-to-the-capital-market thinking. An asset allocation framework does not need to be a black box that processes statistical variables and then spits out an investment plan. It should be a logical framework that lays out choices for investors. The LJE Asset Allocation Process strives to accomplish these objectives. First, it summarizes in a logical and consistent way the investment choices recommended by our assessment of the coming economic environment. Second, we strive to provide in straightforward, plain English an explanation of our views and the rationale for the tilts to the portfolio. The LJE Allocation is a two-step process. First, our quantitative model estimates the probability that one asset class will outperform another. Second, we tilt the asset class benchmark allocation in direct proportion to the probability estimates as well as the share of the asset class market capitalization relative to the global liquid markets. Our model prescribes a decrease in the portfolio’s fixed income exposure relative to the benchmark. As a result of this, during the third quarter the allocation to fixed income declines to 35.29% relative to a 40% benchmark allocation while the equity allocation increases to 64.71% relative to a 60% equity benchmark allocation. During the second quarter the benchmark appreciated 5.335% while the LJE Asset Allocation utilizing the ETFs gained 5.85%. The LJE tilt portfolio outperformed the benchmark by fifty-one basis points during the second quarter of 2025.

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