Overview of Asset Allocation (2025 Level III CFA® Exam – Reading 4)

Learn asset allocation and related decisions in CFA Level III Portfolio Management with Professor James Forjan, PhD, CFA. This lesson explains how investment governance, strategic asset allocation, risk objectives, investment constraints, and portfolio implementation work together in the investment management process. You'll learn how to develop an effective investment governance framework, construct an economic balance sheet, compare asset-only, liability-relative, and goals-based approaches to asset allocation, evaluate risk, and apply strategic and tactical asset allocation concepts. The lesson also covers the global market portfolio, active vs. passive management, risk budgeting, and portfolio rebalancing. What you'll learn: ✓ Investment governance and the policy statement ✓ Investment objectives and constraints ✓ Strategic asset allocation ✓ Economic balance sheets ✓ Asset-only, liability-relative, and goals-based investing ✓ Portfolio risk under different asset allocation approaches ✓ Super asset classes and asset class selection ✓ Common risk factors in asset allocation ✓ Utility maximization and the optimal risky asset weight ✓ The asset allocation process ✓ The efficient frontier and global market portfolio ✓ Passive vs. active management ✓ Tactical and dynamic asset allocation ✓ Risk budgeting and risk management ✓ Portfolio rebalancing Chapters: 00:00 Introduction to Asset Allocation 03:05 Effective Investment Governance 09:03 Investment Objectives and Constraints 15:09 Investment Policy Statement 17:49 Rebalancing and Monitoring 19:31 Governance Audit 21:55 Economic Balance Sheet 27:11 Approaches to Asset Allocation 30:54 Risk Under Different Asset Allocation Approaches 34:30 Super Asset Classes 36:19 Criteria for Specifying Asset Classes 37:55 Common Risk Factors 40:30 Utility Maximization 43:30 Optimal Weight in the Risky Asset 46:02 Nine-Step Asset Allocation Process 47:41 Efficient Frontier and Capital Market Line 48:58 Global Market Portfolio 51:27 Passive vs. Active Management 52:05 Strategic Implementation Choices 53:32 Behavioral Considerations 55:09 Risk Budgeting 56:16 Rebalancing and Strategic Considerations 57:09 Summary: Asset Allocation and Governance Study with AnalystPrep: CFA Level I:https://analystprep.com/shop/cfa-leve... CFA Level II:https://analystprep.com/shop/cfa-leve... CFA Level III:https://analystprep.com/shop/cfa-leve... Follow AnalystPrep for more CFA® and finance education content: Facebook:   / analystprep   Instagram:   / analyst_prep   LinkedIn:   / analystprep   #CFA #CFALevel3 #CFAExam #CFAExamPrep #CFALevel3Prep #AssetAllocation #PortfolioManagement #InvestmentManagement #StrategicAssetAllocation #TacticalAssetAllocation #RiskManagement #PortfolioRisk #Rebalancing #AnalystPrep