The traditional 60/40 buy and hold portfolio is dead, CMG Capital Management Group CEO Steve Blumenthal told InvestmentNews in the story Investment Managers ditching 60/40 portfolios in favor of more liquid alternatives
Enhanced Modern Portfolio Theory is what Blumenthal calls it. It’s not that Modern Portfolio Theory (MPT) is wrong, rather that it’s time to question whether 60/40 remains the best way to optimize the risk-reward relationship. This asset mix is simply too narrow in the current low-dividend-yield, low-inflation, low-interest-rate environment.
Fortunately, over the past 15 years a host of new, liquid investment solutions have become available, and advisors have access to investment options that, until recently, were the exclusive province of institutions. These investment vehicles can help you build more diverse, resilient portfolios designed to enhance return and reduce overall portfolio risk.
Excerpt from the Investment News story:
“The argument for 60/40 is that it can provide diversification, downside protection, upside participation and income. Achieving those results now requires adopting more flexible strategies, particularly liquid alternatives,” said Steve Blumenthal, chief executive of Capital Management Group Inc.
A portfolio that Mr. Blumenthal calls the new 60/40 would include 30% equities (usually hedged with options); 30% fixed income, using flexible-strategy exchange-traded funds; and 40% of what he describes as liquid, tactical funds.
Mr. Blumenthal uses a price momentum strategy with the alternatives and shifts funds to assets showing the strongest price momentum. That discipline is a better way for advisers “to tackle the environment,” he said.
See the full story in InvestmentNews: Investment Managers ditching 60/40 portfolios in favor of more liquid alternatives
