At this year’s PortfolioConstruction Conference (August 26-27, 2009) asset allocation in the new reality will be discussed when the Hon. Dr Pippa Malmgren returns as a speaker.
The new reality requires that we approach asset allocation with a clean sheet of paper.
Malmgren will be asking if we are trying to achieve performance or the preservation of capital. In the new reality, preservation of capital will probably provide performance but not vice versa.
In the old reality, volatility was low, capital readily available, and inflation suppressed — we focused on certain risks but not others. In the new reality, we have to contend with new (actually very old) risks.
Malmgren further contends that in the old reality, the yield curve was flat so you needed structured products, black boxes, hedge funds, and leverage. But in the new reality, we’re faced with a steepening yield curve, so “plain vanilla” is good.
Finally, in the old reality, country risk disappeared while, in the new reality, the path to riches once again is through understanding country and sector opportunities.
Now in its seventh year, PortfolioConstruction Conference has earned a reputation as the investment conference of the year. To register, go to http://www.PortfolioConstruction.com.au/Conference.
Research papers from the PortfolioConstruction Conference will be available in the August edition of Money Management’s Technical Adviser.
