Striving to Optimize Performance with Asset Class Selection
Asset class selection is the fundamental building block of the Principal LifeTime portfolios. Our team of portfolio managers starts with core allocations to U.S. equities, non-U.S. equities and fixed income—focusing on the potential risk premiums and diversification benefits.
They then blend in small allocations to certain specialty asset classes—because even in small allocations, specialty asset classes that have low correlations with core asset classes may potentially improve portfolio consistency, by helping to offset weak performance by core asset classes when it occurs.
Each asset class serves a clearly defined role in the overall strategy, such as:
- Capital appreciation
- Income generation
- Inflation hedge
- Capital preservation
Our portfolio managers also incorporate multiple investment styles into their asset allocations, including growth/value and different market capitalizations (e.g., large, mid-size and small companies) for equities as well as varying durations and credit qualities for fixed income.