Bank of Singapore provided an update on its asset allocation framework based on robust optimisation, which was launched a year ago. In our new series, [Inside the Chief Investment Office], Owi Ruivivar spoke about the desire to build portfolios designed to withstand uncertainty and positive client feedback on the new framework.
In July 2025, Bank of Singapore launched a new strategic asset allocation (SAA) framework based on model that adopts robust optimisation techniques. This framework utilizes a range of key inputs, such as expected returns and risks, with a particular focus on generating performance under worst-case scenarios. In a year-long study, the bank stress tested 120,000 portfolios and narrowed down to five model portfolios for clients to adopt.
In comparison, the private banking industry generally adopts two approaches in portfolio construction, according to an interview with Owi Ruivivar, Bank of Singapore’s chief portfolio strategist. First is to build portfolios based on a pre-selected benchmark and attempt to generate alpha. Another is the mean-variance approach, which is based on maximizing returns for a given level of risk based on accurate forecasting.
Concentration and forecasting risk
Ruivivar notes that there are two primary shortcomings in the two popular approaches.
For portfolios based on first approach of using benchmarks, larger market capitalisation will naturally account for a larger allocation, which effectively results in high concentration risk from US equities due to its strong outperformance for many years. And for the second approach, performance is highly dependent on forecasts being correct and there is also concentration risk because portfolios are built based on exposure to fewer asset classes where conviction is the strongest.
“Rather than assume we are fantastic forecasters, because it is really difficult to consistently deliver accurate projections for so many asset classes in a multi-year horizon, we wanted to take a more realistic approach to build diversified portfolios that could perform across a range of plausible outcomes. We want to make sure uncertainty is embedded in portfolio construction. This is robust optimization,” Ruivivar said.
“While this is not new and has been in financial literature for about 20 years, it is very difficult and complicated to implement.”
Positive client feedback
Despite the complexity of robust optimization, Ruivivar observed that clients across the board have been surprisingly receptive to the new SAA framework.
“Professionally managed family offices are a natural match and we can have very technical conversations which they understand because of their background,” she shared.
“But even clients who are not financial professionals by training have been very open-minded. We’ve had many meaningful conversations about the concept of how various assets in their portfolio play an economic role, be it for income, defense, or growth. We do not need to delve deeply into the math with them, as robust optimisation is quite intuitive at its core. It’s really all about creating portfolios that can weather different paths.”
CIO Lab and expansion to alts
In addition to simply applying the SAA framework within Bank of Singapore, Ruivivar said that clients are even exploring its application to their overall assets across other banks. Through a platform called CIO Lab designed to help multi-banking clients who are comfortable with sharing information about assets held at other private banks, Bank of Singapore is able to provide a more holistic perspective and apply the robust optimization technique to the broader portfolio.
The bank will look to further upgrade its capabilities by extending coverage beyond traditional asset classes.
“We continue to enhance our SAA framework and after covering public markets, we are now working on alternatives, including hedge funds, private equities, and private credit. My team is 100% focused on improving the quality and consistency of that data, because this space is not mark-to-market,” Ruivivar said.
Weakness: Continued US exceptionalism
Since its introduction, the new SAA framework has outperformed the traditional 60/40 portfolio benchmark – 60% and 40% allocated towards stocks and bonds, respectively – delivering higher returns while maintaining lower volatility. The equity and bond allocations within the SAA have also each outperformed their respective market benchmarks by a few hundred basis points.
However, Ruivivar admits that while the robust optimisation technique is powerful in building resilient portfolios, it does not excel in every single scenario.
“It is most likely to underperform in a situation where US exceptionalism lasts longer,” she explained. “That would mean US equities rallying strongly and a US dollar that is quite ascendant.”
Global Private Banker’s [Inside the Chief Investment Office] is new editorial series focused on spotlighting the latest CIO developments from industry leaders, including market insights, house views, asset allocation, innovations, and more.
