I Want to Break Free

GMO

James Montier

Article

1 Pages

James Montier argues that policy portfolios, risk parity, and glide-path funds mismeasure risk and overlook valuation. He favors benchmark-free strategic asset allocation that adjusts exposures to opportunities offered by markets, prioritizing real returns and investment judgment over rigid benchmarks and precise but potentially misleading performance measurement.

Key Takeaways

Policy Claims Misunderstood: Asset allocation explained 93.6% of quarterly return variation, but did not generate 93.6% of returns.
Return Assumptions Strained: An 8% pension target required equities to return 10.5% when bonds offered 4%.
Risk Parity Tradeoffs: A 13/87 portfolio returned 9% versus 11% for 60/40 from 1980 to 2009. Top Figures/Charts
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