Asset Class Investing.. the study by Brinson, Hood and Beebower in the Financial Analysts Journal in 1986 "Determinants of Portfolio Performance"
Tuesday 17 July 2007
The main asset classes available to investors, in order of risk, are cash, property, bonds (also known as fixed interest securities), shares and alternative investments such as commodities and private equity.
Several studies have concluded that the combination of asset classes in a portfolio is the single most important factor in determining the investment performance of that portfolio and thus should be the starting point of the investment planning process.
Brinson, Hood and Beebower in the Financial Analysts Journal in 1986 entitled "Determinants of Portfolio Performance" suggested that well over 90% of the variation in investment performance of US pension plans could be explained by differences in asset allocation and this is supported by subsequent research studies that have reached similar conclusions.
Sources: Brinson, Hood, Beebower 1986, Ibbotson & Associates 2002
Interested to know more. See ”Investment Policy Explains All". Click here. This academic paper revisits the Brinson, Hood, Beebower 1986 paper with similar conclusions. In fact, the paper goes on the say” Critics of this concept would say that surely manager selection must account for something. Managers must be important. Our data, and the common sense wisdom of Dr. William F. Sharpe, suggest otherwise. Manager selection matters, but not to any great extent."
Categories:Asset Class Management, Research
posted by Murray Round Wealth Management @ 13:49,
The Authors
Nicholas Round
Nic is the Managing Director of Murray Round Wealth Management Limited, who seeks to ensure the advice provided is truly independent. Based in Shropshire with clients local, national and worldwide, Nic has strived to find the best possible service for his clients needs, by researching and studying the market, trends and philosophies. Nic strongly believes Asset Class Management will bring his clients Financial Freedom, Independence and Happiness.
Kirsty
Kirsty is our communication guru. Managing information requires considerable due diligence and her passion for organisation gives the clarity we all seek. From Shropshire, with a Psychology Degree and much travelling, she is now back in Shrewsbury...and London often, keeping us all at Murray Round focused.
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