Asset Allocation Update

Latest Analysis on Portfolio Construction

The first quarter has been a challenging one for investors who have had to continually revisit their tactical outlooks in an everchanging geopolitical and investment landscape. It may be an opportune time to take a step back and consider long-term portfolio construction viewpoints to ensure asset allocation decisions are guided not by the latest shock to the markets but by strategic thinking based on long-term capital market views. This selection of papers includes 10-year forecasts from PGIM Quantitative Solutions and DWS Group. Columbia Threadneedle’s paper takes a historical view to try to explain future returns, whilst Grayscale’s asset allocation view introduces a postmodern portfolio theory to incorporate crypto usage.

Capital Market Assumptions: Q1 2022 (PGIM Quantitative Solutions)

PGIM Quantitative Solutions sets out their latest long-term thinking including market outlook, economic outlook, and individual asset class approaches. Their forecasts look over a 10-year horizon, appraising expected returns and volatility.

Blending Returns, Updated (BlackRock, Feb 2022)

For compliance reasons, this paper is only accessible in the United States and Canada

Blackrock offers advice on some of the main components of a successful long-term strategic asset allocation (SAA) in this updated analysis. They draw on the experience of investing during Covid-19 to test their framework for blending returns.

Dealing with Volatility: Key concepts for investors (Lord Abbett, Mar 2022)

For compliance reasons, this paper is only accessible in the UK & Europe

Geopolitical tension and market volatility are nothing new for investors to deal with. Lord Abbett presents evidence that short-run investment drawdowns can be typical, and that historically they have often been followed by sizeable market rallies.

Allocations for Inflation: The problem with inflation (LGIM, Mar 2022)

For compliance reasons, this paper is NOT accessible in the United States and Canada

The first of a series of articles from LGIM tackling inflation’s impact on asset allocation. They advise against becoming too rigid in inflation forecasting, and to instead be nimble enough to react to a range of possible economic and market outcomes.

The Big Picture: Global asset allocation 2022 Q2 (Invesco)

For compliance reasons, this paper is only accessible in certain geographies

This quarterly view provides an update on Invesco’s asset allocation following the disruptive market events so far this year. They cover projections over the next decade using their capital market assumptions, as well as shorter term views.

DWS Long View – 2022 (DWS Group)

DWS Group looks through the current market uncertainty to present this long-term outlook and asset allocation views. They also include their 10-year forecasted and historical returns and volatilities with some changes from last year’s publication.

Occam's Razor and Portfolio Rebalancing (Columbia Threadneedle, Feb 2022)

Columbia Threadneedle suggests that a component-based analysis can be an effective way of forecasting investment returns, which can in turn be a valuable tool for investors as they formulate their medium- and long-term asset allocations.

The Postmodern Portfolio Crypto Allocation Thesis (Grayscale, 2022)

Traditional approaches to asset allocation have been challenged by market volatility and an evolving investment environment. This paper covers long term market assumptions and whether investors should be considering a 60/40+Crypto allocation.

UPCOMING WEBINAR

Webinar 07 Apr: Portfolio construction strategies – What's next? (Nuveen, 2022)

In this webinar, Nuveen will discuss the results of their recent institutional survey and several factors that asset allocators are currently grappling with, including the search for yield, climate priorities, and how best to address diversity.