Perspectives Blog

The role of asset location

Abram Claude, Vice President, Columbia Management Learning Center | October 23, 2013

…while increasing after-tax returns. The tax tail should not wag the investment dog. The investment strategy and asset allocation approach come first. But once that is in place, it can be beneficial to apply asset location as a follow-on strategy that considers the benefits of placing less tax-favored investments under tax-deferred or tax-free registrations in order to increase after-tax returns. This strategy could be particularly effective with…

New taxes require strategies to maximize after-tax return

Abram Claude, Vice President, Columbia Management Learning Center | March 18, 2014

…ing the additional tax bite that began in 2013. Managing the differential in tax treatment of securities through asset location Investors with sizeable investments in taxable accounts, especially investors who are still working and are not currently living on their investments, should consider a strategy for sheltering tax-sensitive securities through asset location. Once an optimal asset allocation strategy is in place, the overlay of an asset l…

The end of “risk-on/risk-off”

Anwiti Bahuguna, Ph.D., Senior Portfolio Manager | February 3, 2014

…r, in the post crisis period, their correlation to equities increased sharply and they became a risk-on/risk-off asset class as macro uncertainty meant potentially weaker growth and weak demand for commodities. While the commodity/equity correlation has diminished somewhat, commodities as an asset class remain sufficiently unattractive particularly when you take into account their much higher volatility. Treasuries or government debt remains the…

Does a perfect policy portfolio exist?

Jeffrey Knight, CFA, Global Head of Investment Solutions and Asset Allocation | May 5, 2014

…olios is closer to perfect than any single policy portfolio. The idea of a policy portfolio, the core strategic asset class weightings for an investment portfolio, has evolved significantly during the course of my career as an asset allocation specialist. From the humble beginnings of standard balanced investing (the good old 60/40), investors have searched for the best neutral asset allocation to serve their goals over the long term. Over the l…

The importance of taking a long-term perspective

Jeffrey Knight, CFA, Global Head of Investment Solutions and Asset Allocation | February 3, 2014

We examine the value in maintaining a long term outlook for major asset classes We review our forecast for several major asset classes over the next five years Why maintaining realistic expectations for long term asset class performance is so important For asset allocation decisions, we find great value in maintaining a long-term outlook for major asset classes. Twice a year, in fact, we conduct an extensive update of our five-year return fore…

Global Asset Allocation Outlook (as of May 13, 2014)

Columbia Management Global Asset Allocation Team, | June 2, 2014

The global asset allocation team reaffirmed their recommendation to modestly overweight equities versus bonds, despite the slight underperformance of equities relative to bonds so far this year. The S&P 500 is up about 3.5% while the Barclay’s aggregate index is up 4.0% and longer dated bonds are up over 13%. This strong bond market performance is contrary to consensus expectations which had forecast yields to rise above 3.5% this year. With…

Interpreting the bond rally from a multi-asset perspective

Jeffrey Knight, CFA, Global Head of Investment Solutions and Asset Allocation | June 2, 2014

…n will be crucial. The chart below extends the concept of our framework by presenting the historical evidence of asset class performance (as measured by Sharpe ratio) observed within each state. As you can see, the Sharpe ratio for each broad asset class is decidedly different across the four market states, most notably between the bearish and highly bullish market state. This suggests that the appropriate policy portfolio for each market state s…