Redwood Investment Management is marking the 10-year anniversary of its Engineered Risk-Budgeted model portfolios, which combine public and private investments through the firm’s RiskFirst framework. The ERB lineup currently includes five models designed to help financial advisors align portfolio construction with client expectations around market participation, income, and downside risk.
Redwood’s approach integrates private investments directly alongside public-market strategies rather than treating alternatives as separate allocations.
The portfolios have evolved to include private real estate debt, which Redwood uses as a potential source of current income and portfolio stability.
Public investments, private assets, and defensive strategies each play different roles within the models.
Redwood also uses quantitative analysis to inform defensive positioning when it identifies rising drawdown risk.
The ERB portfolios originated from a challenge the firm saw among advisors attempting to combine multiple investment strategies without unintentionally creating overlapping holdings or excessive exposure to particular assets.
Redwood developed the models to coordinate those investment decisions under a single portfolio-management framework.
Each of the five ERB models has a defined drawdown-risk tolerance used to guide portfolio construction and management.
Redwood defines risk primarily through drawdown, referring to the decline in portfolio value from a peak to a subsequent low.
The firm distributes its investment strategies through mutual funds, LeaderShares ETFs, and its Engineered Risk-Budgeted model portfolios.
KEY QUOTES:
“We created the ERBs to give financial advisors a partner in that responsibility. Our goal is to help retirees participate in markets and remain invested with greater confidence, knowing that a disciplined process is actively addressing risk in their portfolios.”
Richard Duff, Managing Partner and Portfolio Manager at Redwood Investment Management
“The opportunity is not simply to add private assets to a model portfolio. It is to integrate public and private investments so that each has a clear role in serving the client.”
Michael Cheung, Managing Partner and Portfolio Manager at Redwood Investment Management
