What is the main goal of an asset-only asset allocation?

The primary goal of an asset-only asset allocation is to maximize the Sharpe ratio for a given level of risk, which is a measure of the excess return per unit of risk. This approach centers on optimizing the expected returns of the asset portfolio while maintaining an appropriate level of volatility. By doing so, investment managers aim to achieve the best possible risk-adjusted returns, enhancing overall efficiency in the portfolio.

In an asset-only approach, the focus is solely on the selection and management of the investments within the portfolio, disregarding any liabilities or specific investment constraints that may apply to the investor, such as spending needs or specific risk tolerance levels. This allows for a purer assessment of the asset's risk-return profile.

Other options reflect different goals: for example, achieving maximum liquidity is more pertinent to a cash management strategy rather than an asset allocation focus, minimizing management costs centers on operational efficiency rather than performance maximization, and a sole focus on fixed income investments does not characterize an asset-only allocation, which typically involves a mix of asset classes to achieve optimal returns relative to risk.