He notes that empirical research has shown that asset allocation choices can account for 75% to 85% of a portfolio's returns.
As we noted in our offshore funds issue of Aug. 23, 1999 ("Back to basics"), asset allocation choices can account for 75% to 85% of a portfolio's return.
The fourth is that equities will still be the asset of choice.
Ten or 15 years ago relatively few people thought stocks were the asset of choice for the long run.
"Seeing as these are supposedly the safe-haven asset of choice, people are concluding that the risk is becoming systemic," Mr. Diebel said.
And they also had been inculcated with the feeling that equities were the asset of choice because over any rolling 20-year period they always outperform bonds.
Government bonds offer low yields; corporate bonds would be hit harder than equities by recession, if it occurs; and commodities have already had a very good run.Shares are thus the default asset of choice.
If we are right and the global economy shows better strength in 2013, then central banks will withdraw at least some of their liquidity and equities will be the asset of choice of many investors.
I don't think we'll ever get to a point where bonds will be universally considered an asset of choice, but I don't see an equity culture coming back for quite a while.
Investors have even been willing to accept a negative yield on bonds issued by Nestlé, a Swiss foods group, in effect paying for the privilege of lending it money.Until the 1970s property was the asset of choice for long-term investors such as university endowments and pension funds.
