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Portfolio Construction & Analysis

Our analysis of portfolio construction and time-varying allocation strategies is based on a comprehensive understanding of portfolio returns.

Our analysis in portfolio construction begins with analysing the major drivers of asset prices and returns. In addition to forecasting economic fundamentals, we focus on the other drivers of the shifts in the discount rates applied to future cash flows, which can explain the variation in asset prices and returns.

Discount rates evolve through time in response to changes in investors’ risk perceptions and risk tolerance. Measures of conditional volatility, like the VIX index, may provide a fairly reliable, real-time proxy for the price of risk, accounting for most of the variation in broad share market price-to-earnings ratios and corporate bonds spreads.

Economic Modelling

Economic modelling is the backbone of our work: providing policy analysis and advice, undertaking research, and generating specific forecasts for clients. It is both qualitative and quantitative. Our modelling allows clients to:

  • Understand the complex economic interactions that result from changes in policy or the business and economic environment
  • See the impact of change on the bottom line or outlook for their business or industry
  • Equip clients with solid data and information needed to enter the economic or policy debate
  • Keep abreast of the key drivers that affect their business

We produce a wide variety of specialised economic models, including existing in-house models, and/or specialised models designed specifically for the client

Our models are easily understood, flexible, user friendly and readily updated. We also provide training in the use of our software to assist you to model your own scenarios.


We have developed several innovative and robust models to allow us to make macro economic, industry and regional forecasts and track financial variables including flow of funds items.  We have a formal budget model of the Commonwealth and State budgets which can be used for examining tax reform and expenditure review options.

We provide model-based forecasts for specific sectors of the economy, focusing on output and employment growth, prices (including wages), interest rates, exchange rates, commodity prices, and stock market prices over both the short and longer term (and incorporating demographic trends).

Many of these factors are of critical importance to business and strategic planning:

  • macro/state/industry indicators (output, employment, wages and prices)
  • financial market indicators (exchange and interest rates and stock market indexes and estimates of risk premiums and market volatility), and
  • federal and state budget balances (including structural balances, measures of fiscal stimulus and analysis of public and private infrastructure spending).

Forecasts are updated on a monthly, quarterly or six monthly basis.

Environmental Policy and Risk Assessments

To provide a comprehensive analysis of issues impacting on economics and finance, our economic modelling extends to an analysis of emissions and environmental policy and the risks for investors in uncertain situations. They include strategies to deal with these uncertainties for governments and the private sector. They also include Environmental Impact Assessment (EIA) reports on proposed projects.

Key aspects considered in a Macroeconomics report include:

  • The nature of emissions and environmental problems and possible developments in a fast changing technological and political setting
  • Opportunities for investors
  • Potential risks and impacts from existing and proposed activities
  • Quantification of risk and predicted impact
  • Environmental management measures

All Macreconomics impact assessments are based on sound science with any uncertainty specified, providing decision-makers the information and the confidence they need to consider the project.