Major Asset Classes, Performance Update

It was a tough year in 2011 for minting risk premiums if you held a broadly diversified portfolio. Bonds and REITs were the big winners among the major asset classes last year. If you didn’t hold generous helpings in those corners, your results for the year just passed are probably modest at best. Stocks were mixed, if we can call it that, with U.S. equities generally rising by a lackluster 1% on the year on a total return basis, but it was ugly for overseas markets in dollar-based terms. Broad measures of commodities suffered too, although gold and oil each climbed around 10%.

Unsurprisingly, a broadly diversified portfolio delivered a distinctly uninspiring performance in 2011. The Global Market Index (GMI) shed 1.4% in 2011, a big change from the 10%-plus rise for 2010. Equally weighting all the major asset classes managed to eke out a small gain on the year, but even this usually reliable methodology wasn’t much help for the past 12 months.


For a bit of historical context, consider how trailing annualized 5-year returns stack up, one of the most stress-tested runs in modern market history. GMI posted a modest 1.8% annualized gain over that volatile stretch. Not very impressive, although its equal weighted counterpart compares favorably with an annualized 4.3%.

It’s hardly surprising that equal weighting is competitive if not superior (for some thoughts on why, see my profile of the strategy here) to weighting assets by market value. Granted, 4% or so a year over the last 5 years is a yawn. But it’s also a reminder that turning a profit hasn’t been easy in recent history. For those investors who beat the odds the table above suggests that they’ve done so with generous helpings of bonds. The question is whether the past is still prologue?

This post originally appeared at The Capital Spectator and is posted with permission.

Comments are closed.

Most Read | Featured | Popular

Blogger Spotlight

Aaron Menenberg Policies of Scale

Aaron Menenberg is Foreign Policy and Energy analyst, and a Future Leader with Foreign Policy Initiative. He also co-hosts Podlitical Risk (@podliticalrisk). He is a graduate student in international relations at The Maxwell School of Syracuse University. Previously he has worked at Praescient Analytics, The Hudson Institute, for the Israeli Ministry of Defense, and at the IBM Corporation. The views expressed are his own, and you can follow him on Twitter @AaronMenenberg. He welcomes questions and comments at