Investment Strategy

Asset Dedication created the Defined Income Separate Account to link your client’s fixed income portfolio to the cash flow needs you identify in your client’s financial plan. With roots in institutional investing, our proprietary algorithms calibrate TIPS, CD’s, Treasuries, agencies, AA /AAA rated corporate, municipal or similar investment grade fixed income securities to deliver predictable cash flows over a chosen time horizon (usually 5-10 years). Our process finds the least cost solution to build a portfolio of individual fixed income securities that minimizes the cost to generate a particular income stream, freeing up money for other purposes.

Planning Benefits

We recognize that each client is different. We don’t fit your clients into a few generic model portfolios. Instead, we have developed a proprietary process for constructing a Defined Income Portfolio tied directly to your client’s financial plan, enabling you to:

  • Provide a “retirement paycheck” for your clients
  • Immunize their cash flows from changes in interest rates
  • Keep your clients in control of their assets instead of committing to an annuity contract
  • Establish a deferred income strategy for clients approaching retirement
  • Integrate behavioral and quantitative finance in a way that is intuitive and easy to explain to clients
  • Balance your clients need for predictable income and the long-term probability of success

Asset Allocation

Asset Dedication has worked hard to ensure that our Defined Income Separate Accounts can fit seamlessly into your firm’s current planning process and asset allocation framework. There are two approaches to setting your client’s fixed income allocation; Time Horizon and Asset Allocation.

The Time Horizon approach starts with the length of time you choose to protect your client’s income stream. Your client’s fixed income allocation flows from the time horizon decision and is a function of the cost of the securities needed to build the specified income portfolio.

The Asset Allocation approach starts with your fixed income allocation and solves for the length of horizon the income portfolio can support. By converting a fixed income allocation to a protected income stream, you will be getting double duty from the allocation. The portfolio will now generate predictable income linked intuitively to your client’s financial plan in addition to the expected volatility dampening from beta exposure to the fixed income asset class.

Dynamic Rebalancing

Once the initial portfolio has been established, it can be extended or rolled forward each year to provide a perpetual steam of income covering the client’s lifetime. Our Critical Path® system provides the benchmark that drives the dynamic rebalancing process that determines whether or not to roll the portfolio. Again, we place the financial plan at the core of the portfolio construction process.