Top-Down Asset Allocation for Latin America

1
Top-Down Asset Allocation for Latin America

• Clairvoyant Investment Advisors
• Sonia Kopp
• Chris Lyford
• Peter OHara
• Denis Rappaport
• Michelle Todd
• February 24, 2000

2
Investment Mandate

• To use a top-down asset allocation model to
  dynamically allocate amongst five Latin American
  Countries with the objective of outperforming
  established dollar-priced Latin American indices.

3
Markets and Indices

• Argentina
• Brazil
• Chile
• Mexico
• Venezuela
• IFC Latin America U Index
• MSCI Latin America U Index

4
In-Sample Model Summary
5
1999 Out-of-Sample Results
6
Currency Comment

• A Critical Issue
• Overlays Expensive
• Predicting Returns Avoiding De-valuations

7
Final Insights and Remarks

• Implementation
• Time Horizon
• Model Deterioration
• Improving Top-Down Latin American Strategies in
  the Future

8
Raw Direction Count Data