The Global Portfolio (Yes, We Mean Everyone's)

(November 5, 2012) – Three Dutch allocation specialists took time from their day jobs to produce one the most rigorous estimates of the global aggregate portfolio ever, and have published it in whitepaper. 

Authors include Robeco’s Chief Strategist Ronald Doeswijk and Vice President Laurens Swinkels, as well as Rabobanks’s Trevin Lam, a quantitative analyst. 

Their results: At the close of 2011, the total value of invested assets globally was approximately US$83.5 trillion. 

Of that, 54.6% was in fixed income: 30% in government bonds, 18.4% in non-governmental bonds, 2.6% in emerging market debt, 2.2% in inflation linked bonds, and 1.4% in high-yield debt. 

The average equities allocation isn’t quite the standby 40%, but it’s close at 34.7%. In total, that’s $29 trillion worth of stocks, according to the authors. Still, equities represent the smallest portion of the global portfolio since 1959—the first year for which the authors analyzed data. Allocations peaked around 1969 at 64.1%, and fell sharply after the 2008 financial crisis. 

Fixed-income allocations absorbed the slack as investors fled the stock market, according to the authors’ data, with both sovereign and corporate fixed-income allocations at near record highs. 

These figures include all assets that investors have actually invested in, thereby excluding durable consumption goods, human capital, personal housing, government stakes in companies, and central bank holdings of gold. 

Doeswijk, Swinkels, and Lam undertook this “non-trival exercise” (as they put it) to create a comprehensive benchmark for strategic asset allocation. “It can also be used as a starting point for portfolio construction or as a sanity check to determine deviations of the investor’s portfolio from the market portfolio,” they wrote in the introduction. “In addition, investors employing tactical asset allocation strategies might use large deviations from long-term average market portfolio weights as a valuation indicator. But, aside from these practical perspectives, the market portfolio is also interesting from a theoretical perspective.” 

Read the entire whitepaper, “Strategic Asset Allocation: The Global Multi-Asset Market Portfolio 1959-2011,” here.