One reason why equity allocations may never fully recover from recent injuries
Oct 28th, 2009 | Filed under: CAPM / Alpha Theory, Today's Post
We’ve read a lot of reports over the past year about how institutional investors are eschewing equities in favour of fixed income and alternative investments. For example, back in February, Pensions & Investments reported:
“Consultants, managers and pension fund executives agree that European pension funds will settle at a much lower equity allocation — unlike the last time, when allocations recovered to previous levels.
In the long term, the allocation to equity will probably settle around 40% (of the total portfolio) rather than around 60%,” said Paul Price, Dublin-based global head of institutional business at Pioneer Investments, which had $213.7 billion in assets under management globally at year-end 2008.”
At around the same time, consultancy Watson Wyatt confirmed this forecast (see chart below from report available here with free registration): More…
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FYI – this type of strategy is already being employed in the mutual fund world. see the AIM Balanced Risk Allocation Fund (ABRZX)
http://www.invescoaim.com/portal/site/aim/menuitem.20d89211f4014c9d3e566943acd8fba0?fundId=29336