Asset Allocation. William Kinlaw. Читать онлайн. Newlib. NEWLIB.NET

Автор: William Kinlaw
Издательство: John Wiley & Sons Limited
Серия:
Жанр произведения: Ценные бумаги, инвестиции
Год издания: 0
isbn: 9781119817727
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tracking error of a portfolio composed of these asset classes with intermediate-term bonds is only 1.1%. Intermediate-term bonds are, therefore, redundant. The lowest possible tracking error with commodities, by contrast, is 19.5%; hence, we include commodities in our menu of asset classes. Although there is no generically correct tracking error threshold to determine sufficient independence, within the context of a particular group of potential asset classes the answer is usually apparent.

      The addition of an asset class to a portfolio should raise the portfolio's expected utility. This could occur in two ways. First, inclusion of the asset class could increase the portfolio's expected return. Second, its inclusion could lower the portfolio's risk, either because its own risk is low or because it has low correlations with other asset classes in the portfolio.

      The expected return and risk properties of an asset class should not be judged only according to their average values across a range of market regimes. A particular asset class such as commodities, for example, might have a relatively low expected return and high risk on average across shifting market regimes, but during periods of high financial turbulence could provide exceptional diversification against financial assets. Given a utility function that exhibits extreme aversion to large losses, which typically occur during periods of financial turbulence, commodities could indeed raise a portfolio's expected utility despite having unexceptional expected return and risk properties on average.

      An asset class should not require an asset allocator to be skillful in identifying superior investment managers in order to raise a portfolio's expected utility. An asset class should raise expected utility even if the asset allocator randomly selects investment managers within the asset class or accesses the asset class passively. Not all investors have selection skill, but this limitation should not disqualify them from engaging in asset allocation.

      Investors should be able to commit a meaningful fraction of their portfolios to an asset class without paying excessive transaction costs or substantially impairing a portfolio's liquidity. If it is unusually costly to invest in an asset class, the after-cost improvement to expected utility may be insufficient to warrant inclusion of the asset class. And if the addition of the asset class substantially impairs the portfolio's liquidity, it could become too expensive to maintain the portfolio's optimal weights or to meet cash demands, which again would adversely affect expected utility.

      We believe the following asset classes satisfy the criteria we proposed, at least in principle, though this list is far from exhaustive.

Cash equivalents Foreign developed market equities
Commodities Foreign emerging market equities
Domestic corporate bonds Foreign real estate
Domestic equities Infrastructure
Domestic real estate Private equity
Domestic Treasury bonds Timber
Foreign bonds Treasury Inflation Protected Securities (TIPS)

      The following groupings are often considered asset classes, but in our judgment fail to qualify for the reasons specified. Obviously, this list is not exhaustive. We chose these groupings as illustrative examples.

Art Not accessible in size
Global equities Not internally homogeneous
Hedge funds Not internally homogeneous and require selection skill
High-yield bonds Not externally heterogeneous
Inflation Not directly investable
Intermediate-term bonds Not externally heterogeneous
Managed futures accounts Not internally homogeneous and require selection skill
Momentum stocks Unstable composition

      In the next chapter, we describe the conventional approach to determining the optimal allocation to asset classes.

      1 Kaplan, S. and Schoar, A. 2005. “Private Equity