Year-to-date performance of global asset classes and multi-asset portfolios
- Depending on your investment horizon and your risk preference, your performance since the start of the year has varied between a loss of 1% and a gain of 4% if you had a diversified portfolio.
- As a perspective, most of the major asset classes have performed positively so far this year. Asset class returns range from a loss of 17% to a gain of 24%.
- There is no standard for valuing global multi-asset portfolios, but we do offer some benchmark choices.
This pandemic year has challenged most investors. The US stock market suffered a 35% loss in February-March, but has recovered since then, at least so far.
The question now is whether we had a V-shaped recovery or the first leg of several W’s to come. In this report, we take a look at the performance through September of various individual asset classes, as well as global multi-asset portfolios.
Performance of asset classes
Led by gold with a 24% return, most assets have generated positive returns so far in 2020. US stocks have gained 5.5%, but foreign stocks have lost 7%. Real estate (REIT) was the biggest loser with a loss of 17%, followed by commodities with a loss of 12%. There is a 41% gap between the best performing asset and the worst performing asset, so asset allocation is, as usual, a powerful determinant of investment performance, as we have seen. we’ll see in the next section.
Performance of global multi-asset portfolios
The evaluation of the performance of a multi-asset portfolio must be based on the purposes of the multi-asset portfolio evaluated, namely its investment horizon and its level of risk. The fund’s performance at target date provides this perspective. There are a few good benchmarks to choose from, described in This article. We use a conservative benchmark and a moderate benchmark in the following chart.
Moderate portfolios (Industry) performed better over shorter time horizons, gaining 3.74% for Today funds against -0.81% for a 40-year horizon (2060). The risk was not rewarded. We use the S&P Target Date Fund Indices for Industry. Conservative (CLEVER) portfolios performed better than industry for long horizons, but lagged behind for short horizons. SMART funds contain less than 30% risky assets near the target date, compared to over 80% for the industry. We view long-term stocks and bonds as risky.
With $ 2.5 trillion and 30 million investors, the performance of the target date fund (TDF) is a big deal. Good luck that you are invested in a TDF. The relevant question is how you fared compared to what you should have expected. That’s what standards are for – to set expectations. Without a standard, we judge blindly. One of the potential standards presented above can make your TDF performance look good, while the other does not. Choose your standard wisely.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.