Great Reads: “Asset Allocation in a Crash Prone World”
Around a week or so ago while in a “head down” research phase for Asset Allocation Summit Australasia 2012, set to be held in February 2012, I came across a very interesting article. Actually, the article was forwarded to me by Glenn Langton from GCL Consulting, a passionate researcher and consultant into the area. Naturally, I met him for a coffee at a nearby Gloria Jeans to talk about just that. The article is titled “Asset Allocation in a Crash Prone World” written by Nathan Lee, Kyle Cox and Patrick R. Morris. It’s interesting because there has always been talk of why mean variance optimisation didn’t work during the GFC, sure that’s old news – but there has been a lot less coverage on just how to fill the gap. Some interesting questions to look at were posed to me, in the post GFC investment world, is the way forward in improving the mean variance optimisation model? Or developing and utilising and entirely new model? The article sums up what I, and every investor, manager and consultant in the wide world of wealth management would want to know — “what can an asset allocator do then when a reliable forecast is not possible and therefore mean-variance optimization is not an option?”. As we move further away from the GFC and into further unchartered waters, history a broken compass, I think this is the best time to stop and figure out where sail from here.
Sailor’s Meeting at Asset Allocation Summit Australasia 2012, 20 February, 2012, 0900 hours.
Click here to read the full article.