Executive Summary

Balentine’s annual Capital Markets Forecast is the foundation of our investment process. The projections herein form the basis of portfolio construction both within and across building blocks. Balentine’s Investment Strategy Team has honed this process over many years, and it has a demonstrated positive track record, notably at market extremes. Projections in the Capital Markets Forecast help our team design strategies which increase the probability of reaching individual goals by maximizing risk-adjusted returns. Though strategies are tailored to the unique objectives of our clients, we illustrate the tradeoffs between expected return and risk from today’s starting point by evaluating four different levels of risk aversion.

Risk budgets are based on long-term historical outcomes of bond and equity benchmarks. Strategies range from Conservative (with volatility characteristics of a 100% bond portfolio) to Aggressive (with volatility characteristics of a 100% equity portfolio); in between are Balanced and Growth strategies. For each level of risk, we have Public Market and Fully Diversified options, both with and without Private Capital, to exhibit compromises among reducing volatility and the ability to achieve outsized upside.

Balentine’s building block framework is as follows:

Liquid – Assets in this building block insulate near-term spending needs and seek to protect against interest rate risk and credit risk. An allocation to cash helps avoid permanently impairing capital when portfolios need to meet frequent distribution requirements.

Fixed Income – Fixed Income assets primarily play a role as a “shock absorber” to strategies, with the goal of providing protection when risk assets experience short-term duress. Secondarily, at higher interest rate levels, Fixed Income provides cash flow while managing against interest rate fluctuations, credit risks, currency movements, and unexpected inflation.

Market Risk – The most volatile component of strategies, Market Risk aims to capture public market equity returns, as they are driven by exposure to underlying economic growth, earnings, and current and expected future interest rates.

Alternatives – Formerly named Manager Skill, assets in this building block are allocated to investments which seek to generate returns by capturing risk premia generally not available in the public market arena. The primary goal of Alternatives is to provide additional diversification to portfolios with relatively limited correlation to equity and fixed income markets.

Private Capital – As they are illiquid, Private Capital assets are not available in public markets. Private Capital assets can achieve strong returns over the long term in excess of public markets, enhancing income generation and capital appreciation.