The death of traditional portfolio construction
“We believe that the world we anticipated over the medium term in our New Investment Order paper is the world we are now in. It is a world that is radically changed – one that is testing investors’ preconceptions. It is also an investment environment that continues to evolve. There are no simple answers for the investment community. Traditional approaches have delivered strongly, but it is doubtful they are fit for purpose in the future. As the outlook for traditional beta has declined and the toolkit for defending portfolio returns has shrunk, institutional investors need to reconsider what they invest in, where they invest, and how they make decisions. A deeper understanding of more nuanced and difficult risks is needed and history is an imperfect guide to how to do this. It is a time for investors to challenge their models and assumptions and explore how they now need to balance risk and return.”
USAGOLD note: Linked above is the position statement from Future Fund, Australia’s Sovereign Wealth Fund, on the rationale behind its decision to purchase gold and commodities. We do not know to what extent other sovereign wealth funds are repositioning their assets along these lines. If the move to gold catches on at other SWFs, it will put even more pressure on existing physical supplies already stressed by demand from central banks and other highly capitalized financial institutions.
Also see: Australia’s sovereign wealth fund buys gold, commodities as shadow of 1970s looms/Reuters-USNews/12-18-2022