The investment universe The following is not discussed in great depth here but is an advanced and relevant topic for developing and managing asset management solutions for the personal financial portfolio. It is not a must know for investors, but it is a must do for advisors wishing to provide advanced personalised asset management services. Every asset manager operates and every investor exists in the same value and risk universe, but they occupy different positions within it. The investment universe is comprised of domestic and international markets, smaller companies as well as larger companies, growth stocks as well as value stocks. Every asset management company has a different investment style and will allocate to different areas of this universe for different reasons. What each asset management company must understand is that different positions within the universe are more or less appropriate for investors with different financial and risk profiles. In other words, the amount that is allocated to each area of the universe can actually be determined by the relationship between financial needs, time frames, risk aversions and performance preferences. The need for liquidity and the time frame of the liquidity will influence the market cap, global, yield/value and growth allocation of a portfolio. An organisation that manages total financial needs and assets needs to be able to structure its allocation universe relative to the universe of client liquidity requirements and time frames and to have disciplines to adjust allocation strategies for stock market risk aversion and performance risk aversion. As noted below, the blue quadrant may represent an asset manager’s preferred position, while the yellow quadrant represents the individual’s preferred position. An organisation therefore needs to possess the expertise that allows their asset allocation stance to be directed towards the needs and preferences of the individual without having to compromise the organisation’s own values.
Asset managers therefore need to be able to do the following. Define the performance risk of their style relative to the investment universe and allow investors to determine their position relative to theirs. Educate the client regarding their investment style, allocation, risk and return management. Allow investors to select appropriate performance risk profiles which will be used to determine and manage portfolio allocation over time.
As discussed in this document, managers who cannot adjust their allocation to suit client liability and risk profiles should not be in charge of the overall asset allocation and management decisions. | 
