Portfolio optimization is not a one-size-fits-all process, so why are so many managers relying on a one-size-fits-all approach?

In this paper, the Analytics Team at PGIM seeks to address a key challenge faced by institutional investors to make complex asset allocation decisions, while balancing portfolio performance and fiduciary duties.

The team finds that at present, the generic mean variance model does not adequately address the specific needs of insurance investors subject to regulatory constraints and capital requirements. The solution to this conundrum? A comprehensive approach to asset allocation that provides a more detailed picture of economic outcomes which can ultimately lead to better outcomes for clients' long-term objectives.