From Model Output to Portfolio Authority: A One-Page Decision Record for Investment Committees

Model-generated weights can conceal which forecast, risk estimate, constraint, or trading rule caused a portfolio change. We propose a one-page portfolio authority record that begins with the requested capital decision. It identifies the model input, reconstructs the portfolio without it, and measures what that input added. It records uncertainty, costs, capacity, limits, and fallback. The committee specifies the capital and discretion granted, the authorization’s duration and conditions, and the portfolio restored if authority ends. Evidence earns authority in stages: research, shadow observation, capped pilot, expanded allocation, and standing mandate. In a worked example, a maximum Sharpe portfolio using historical average returns added gross return against its forecast-free control but lowered its Sharpe ratio; against incumbent equal weighting it earned less and traded more, and the return and Sharpe ranges included zero. The illustrative record grants no live model capital: equal weighting remains, and research may prepare a prospective shadow-test plan for committee approval. The same record applies when models select investments, size positions or hedges, time trades, or determine leverage.