Global Market Portfolio

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
User avatar
Topic Author
Maestro G
Posts: 114
Joined: Fri Aug 03, 2007 7:55 pm
Location: San Francisco

Global Market Portfolio

Post by Maestro G » Fri May 29, 2020 9:23 pm

Hi all,

Does anyone know where the 2020 Global Market Portfolio weightings can be found?

Is there an institution that annually tracks this and perhaps lays out the current asset allocations in pie chart form?

I’ve seen studies and articles from 2012, ’14, ’15, ’17, but nothing very current.

Thanks for any guidance or suggestions.

Maestro G
Everything should be made as simple as possible, but no simpler. Most daily market noise is "a tale told by an idiot, full of sound and fury, signifying nothing.”

User avatar
bluquark
Posts: 1119
Joined: Mon Oct 22, 2018 2:30 pm

Re: Global Market Portfolio

Post by bluquark » Fri May 29, 2020 9:56 pm

I just look at https://investor.vanguard.com/etf/profile/portfolio/vt . It has a pie chart updated monthly. After US recovered better than ex-US from the crash, the market weight is about 60% US.
70/30 portfolio | Equity: global market weight | Bonds: 20% long-term munis - 10% LEMB

longinvest
Posts: 4291
Joined: Sat Aug 11, 2012 8:44 am

Re: Global Market Portfolio

Post by longinvest » Fri May 29, 2020 10:01 pm

Maestro G wrote:
Fri May 29, 2020 9:23 pm
Does anyone know where the 2020 Global Market Portfolio weightings can be found?
Maybe you're looking for this thread: Bill Sharpe's preferred portfolio. The global stock/bond (free-float) weightings are regularly updated on the linked thread.
Last edited by longinvest on Sat May 30, 2020 6:59 am, edited 1 time in total.
Bogleheads investment philosophy | One-ETF global balanced index portfolio | VPW

User avatar
Topic Author
Maestro G
Posts: 114
Joined: Fri Aug 03, 2007 7:55 pm
Location: San Francisco

Re: Global Market Portfolio

Post by Maestro G » Sat May 30, 2020 1:34 am

Thanks for your responses, but what I am looking for is the actual Global Market Portfolio beyond only global stocks and global bonds which can, as you have essentially pointed out, be derived from VT and BNDW. This would include other asset classes: TIPS, Commodities, Real Estate beyond REITS, etc, etc…

Thanks again,

Maestro G
Everything should be made as simple as possible, but no simpler. Most daily market noise is "a tale told by an idiot, full of sound and fury, signifying nothing.”

User avatar
Noobvestor
Posts: 5580
Joined: Mon Aug 23, 2010 1:09 am

Re: Global Market Portfolio

Post by Noobvestor » Sat May 30, 2020 4:29 am

Maestro G wrote:
Sat May 30, 2020 1:34 am
Thanks for your responses, but what I am looking for is the actual Global Market Portfolio beyond only global stocks and global bonds which can, as you have essentially pointed out, be derived from VT and BNDW. This would include other asset classes: TIPS, Commodities, Real Estate beyond REITS, etc, etc…

Thanks again,

Maestro G
Slippery slope - do you include privately-held businesses and real estate? Farmland and timber? There are so many things that could be considered part (or not part) of the global market, depending on how you view it. I don't think it's a straightforward question (or has a simple answer).
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

longinvest
Posts: 4291
Joined: Sat Aug 11, 2012 8:44 am

Re: Global Market Portfolio

Post by longinvest » Sat May 30, 2020 6:49 am

Noobvestor wrote:
Sat May 30, 2020 4:29 am
Maestro G wrote:
Sat May 30, 2020 1:34 am
Thanks for your responses, but what I am looking for is the actual Global Market Portfolio beyond only global stocks and global bonds which can, as you have essentially pointed out, be derived from VT and BNDW. This would include other asset classes: TIPS, Commodities, Real Estate beyond REITS, etc, etc…

Thanks again,

Maestro G
Slippery slope - do you include privately-held businesses and real estate? Farmland and timber? There are so many things that could be considered part (or not part) of the global market, depending on how you view it. I don't think it's a straightforward question (or has a simple answer).
It's effectively a complex topic. Here's how I approach it.

There are generally only three types of financial securities which pay us to hold them: interest-paying cash, bonds, and stocks.

Cash doesn't fluctuate in value and is a savings instrument.

High-quality bonds and stocks are investments. While their value fluctuates with supply and demand in their respective markets, they also have an internal driver of returns; bonds pay regular coupons and pay back a principal amount at maturity, and stocks are certificates of ownership of companies that give their owners a right to a fair share of future dividends and voting rights.

As for junk bonds, pink sheet stocks, lottery tickets, and casino games, I consider them gambling.

Finally, gold, commodities, art, and Beanie Babies, I consider them speculative assets as they have no internal driver of returns and they often carry expenses. The only way to make a profit is to sell them for a higher price than paid (including cumulative expenses). They rely on what is commonly called The Greater Fool Theory, where one needs to sell the asset to a greater fool to make a profit.

Personally, I keep some money into a savings account for immediate liquidity and I entirely invest my portfolio into investment-grade stocks and bonds using a low-cost globally-diversified balanced index One-Fund Portfolio which is a good enough approximation of the global stocks and bonds portfolio with a justified home bias. I have no problem skipping on gambling and speculative assets.
Bogleheads investment philosophy | One-ETF global balanced index portfolio | VPW

User avatar
SimpleGift
Posts: 3869
Joined: Tue Feb 08, 2011 3:45 pm
Location: Central Oregon

Re: Global Market Portfolio

Post by SimpleGift » Sat May 30, 2020 8:11 am

Maestro G wrote:
Fri May 29, 2020 9:23 pm
Does anyone know where the 2020 Global Market Portfolio weightings can be found?
The linked paper below updates the "investable" global market portfolio as of October 2019. It's one of the most comprehensive coverage of global assets that I've seen, including equities, private equity, global real estate, investment grade bonds, government bonds, TIPS, emerging market debt, etc.

Historical Returns of the Market Portfolio

For those who don't want to plow through the paper, here's an overall picture of paper's global market portfolio. Equities are split approximately 50/50 between U.S. and ex-U.S. stocks.

User avatar
Topic Author
Maestro G
Posts: 114
Joined: Fri Aug 03, 2007 7:55 pm
Location: San Francisco

Re: Global Market Portfolio

Post by Maestro G » Sat May 30, 2020 11:28 am

SimpleGift wrote:
Sat May 30, 2020 8:11 am
Maestro G wrote:
Fri May 29, 2020 9:23 pm
Does anyone know where the 2020 Global Market Portfolio weightings can be found?
The linked paper below updates the "investable" global market portfolio as of October 2019. It's one of the most comprehensive coverage of global assets that I've seen, including equities, private equity, global real estate, investment grade bonds, government bonds, TIPS, emerging market debt, etc.

Historical Returns of the Market Portfolio

For those who don't want to plow through the paper, here's an overall picture of paper's global market portfolio. Equities are split approximately 50/50 between U.S. and ex-U.S. stocks.
Thanks much SimpleGift, this is precisely what I was looking for. I did come across the Profitt-Goodson article, but I hadn’t noticed that the paper had been revised in 10/2019. That’s probably about as current as I am going to get it seems.
Everything should be made as simple as possible, but no simpler. Most daily market noise is "a tale told by an idiot, full of sound and fury, signifying nothing.”

User avatar
bluquark
Posts: 1119
Joined: Mon Oct 22, 2018 2:30 pm

Re: Global Market Portfolio

Post by bluquark » Sat May 30, 2020 3:37 pm

longinvest wrote:
Sat May 30, 2020 6:49 am
As for junk bonds, pink sheet stocks, lottery tickets, and casino games, I consider them gambling.
Junk bonds don’t belong there because the majority of them are less risky than large-cap stocks. (Just compare how deeply junk bond funds vs total stock funds dipped in March.) Sounds like reaching for justification of whatever bonds happen to be in Vanguard Total Bond on that one.

I think it makes more sense to avoid this unnecessary “gambling” category and simply advocate to include junk bonds and microcaps at their market weight (not much — IUSB has junk bonds and mostly performs the same as BND), and exclude casino chips and lottery tickets based on negative expected return.
70/30 portfolio | Equity: global market weight | Bonds: 20% long-term munis - 10% LEMB

longinvest
Posts: 4291
Joined: Sat Aug 11, 2012 8:44 am

Re: Global Market Portfolio

Post by longinvest » Sat May 30, 2020 4:03 pm

bluquark wrote:
Sat May 30, 2020 3:37 pm
longinvest wrote:
Sat May 30, 2020 6:49 am
As for junk bonds, pink sheet stocks, lottery tickets, and casino games, I consider them gambling.
Junk bonds don’t belong there because the majority of them are less risky than large-cap stocks. (Just compare how deeply junk bond funds vs total stock funds dipped in March.) Sounds like reaching for justification of whatever bonds happen to be in Vanguard Total Bond on that one.

I think it makes more sense to avoid this unnecessary “gambling” category and simply advocate to include junk bonds and microcaps at their market weight (not much — IUSB has junk bonds and mostly performs the same as BND), and exclude casino chips and lottery tickets based on negative expected return.
I think that you misunderstood what I meant. I meant the speculative ones, the bond equivalent of pink sheet stocks.

For domestic (US) bonds, the Bloomberg Barclays U.S. Aggregate Bond Index has a specific set of criteria for including bonds or not. I'd have no problem with a broader capitalization-weighted index that includes more bonds like not-too-junky high yield bonds, inflation-indexed bonds, and floating-rate bonds. I'd also have no problems with an equivalent broader capitalization-weighted index for international (ex US) bonds (with currency hedging).
Bogleheads investment philosophy | One-ETF global balanced index portfolio | VPW

User avatar
nisiprius
Advisory Board
Posts: 41087
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Global Market Portfolio

Post by nisiprius » Sat May 30, 2020 8:12 pm

Mebane Faber's firm, Cambria, offers a "Global Asset Allocation" ETF, GAA. You must judge for yourself how close it comes to your ideas of what a "global market portfolio" should be.

The web page for GAA Cambria Global Asset Allocation ETF says:
The Cambria Global Asset Allocation ETF (CBOE BZX: GAA) utilizes a quantitative approach to manage a diversified portfolio of global asset classes. The Cambria Global Asset Allocation ETF uses a buy and hold strategy that aims to reflect the market portfolio of investable assets.

The Cambria Global Asset Allocation ETF targets investing in approximately 29 ETFs that reflect the global universe of assets consisting of domestic and foreign stocks, bonds, real estate, commodities and currencies.
According to Morningstar, it is invested 17.51% in US stocks, 21.07% in non-US stocks.

I compared GAA (portfolio 1, blue) to a "traditional" portfolio with the same stock allocations--17.51% Total Stock (VTI), 21.07% Total International (VXUS) and the rest in Total Bond (BND), (portfolio 2, red). I also compared it to a Vanguard all-in-one fund with 40% in stocks, the Vanguard LifeStrategy Conservative fund (VSCGX).

Source

Image

Since inception of GAA, both the simple-minded traditional portfolios, with three or four funds, would have did better than the sophisticated GAA with twenty-nine, by these measures:
  • higher return (CAGR)
  • lower volatility (St. Dev)
  • very slightly better best years
  • less severe worst years
  • less severe maximum drawdown
  • better risk-adjusted return by both ratios (Sharpe and Sortino)
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

User avatar
Topic Author
Maestro G
Posts: 114
Joined: Fri Aug 03, 2007 7:55 pm
Location: San Francisco

Re: Global Market Portfolio

Post by Maestro G » Sun May 31, 2020 1:34 pm

nisiprius wrote:
Sat May 30, 2020 8:12 pm
Mebane Faber's firm, Cambria, offers a "Global Asset Allocation" ETF, GAA. You must judge for yourself how close it comes to your ideas of what a "global market portfolio" should be.

The web page for GAA Cambria Global Asset Allocation ETF says:
The Cambria Global Asset Allocation ETF (CBOE BZX: GAA) utilizes a quantitative approach to manage a diversified portfolio of global asset classes. The Cambria Global Asset Allocation ETF uses a buy and hold strategy that aims to reflect the market portfolio of investable assets.

The Cambria Global Asset Allocation ETF targets investing in approximately 29 ETFs that reflect the global universe of assets consisting of domestic and foreign stocks, bonds, real estate, commodities and currencies.
According to Morningstar, it is invested 17.51% in US stocks, 21.07% in non-US stocks.

I compared GAA (portfolio 1, blue) to a "traditional" portfolio with the same stock allocations--17.51% Total Stock (VTI), 21.07% Total International (VXUS) and the rest in Total Bond (BND), (portfolio 2, red). I also compared it to a Vanguard all-in-one fund with 40% in stocks, the Vanguard LifeStrategy Conservative fund (VSCGX).

Source

Image

Since inception of GAA, both the simple-minded traditional portfolios, with three or four funds, would have did better than the sophisticated GAA with twenty-nine, by these measures:
  • higher return (CAGR)
  • lower volatility (St. Dev)
  • very slightly better best years
  • less severe worst years
  • less severe maximum drawdown
  • better risk-adjusted return by both ratios (Sharpe and Sortino)
Thanks Nisiprius!

Yes, I am very familiar with GAA. It is an interesting proxy, which is Faber’s intent. BTW, the actual portfolio allocation breakdown as of today is:

Global Equities: 40%
Global Bonds: 42%
Global TIPS: 6%
Global REITS: 5%
Commodities: 6%
CASH equivalents: 1%

Not implying that this would have improved its standing in your PV comparison (in fact, I’m sure it would have been a disadvantage), just that going forward a more accurate depiction of the portfolio would be important and more informative in comparisons.

And yes, one would have to be comfortable with the following:
  • An equity tilt towards value, momentum and share holder yield given Faber’s research and convictions
    • A nod to value priced bond weighing rather than debt outstanding (though the majority of the bond holdings are Vanguard vanilla etfs)
      • Some concentration on the equity side given the large % inclusion of Cambria Funds. Principally, I believe, to lower costs and execute convictions.
        • A slighter higher er, though 34 bp is certainly not egregious by active management standards and there is no management fee. 34 bp reflects the pass-thru costs of the underlying etfs.

          Only time will tell (more then 5 years) if this will all lead to competitive if not superior risk adjusted returns over traditional 60/40, target date or 3-fund options.

          Best,

          Maestro G
Everything should be made as simple as possible, but no simpler. Most daily market noise is "a tale told by an idiot, full of sound and fury, signifying nothing.”

User avatar
jeffyscott
Posts: 8866
Joined: Tue Feb 27, 2007 9:12 am
Location: Wisconsin

Re: Global Market Portfolio

Post by jeffyscott » Mon Jun 01, 2020 10:21 am

longinvest wrote:
Sat May 30, 2020 4:03 pm
bluquark wrote:
Sat May 30, 2020 3:37 pm
longinvest wrote:
Sat May 30, 2020 6:49 am
As for junk bonds, pink sheet stocks, lottery tickets, and casino games, I consider them gambling.
Junk bonds don’t belong there because the majority of them are less risky than large-cap stocks. (Just compare how deeply junk bond funds vs total stock funds dipped in March.) Sounds like reaching for justification of whatever bonds happen to be in Vanguard Total Bond on that one.

I think it makes more sense to avoid this unnecessary “gambling” category and simply advocate to include junk bonds and microcaps at their market weight (not much — IUSB has junk bonds and mostly performs the same as BND), and exclude casino chips and lottery tickets based on negative expected return.
I think that you misunderstood what I meant. I meant the speculative ones, the bond equivalent of pink sheet stocks.

For domestic (US) bonds, the Bloomberg Barclays U.S. Aggregate Bond Index has a specific set of criteria for including bonds or not. I'd have no problem with a broader capitalization-weighted index that includes more bonds like not-too-junky high yield bonds, inflation-indexed bonds, and floating-rate bonds. I'd also have no problems with an equivalent broader capitalization-weighted index for international (ex US) bonds (with currency hedging).
FWIW, for high yield in the period 2002-2017, the linked paper uses "the Bloomberg Barclays Global Corporate High-Yield Index". And states that "This index represents the industrial, utility, and financial institutions issuers from the union of the U.S. High-Yield, the Pan-European High-Yield, and Emerging Markets Hard Currency High-Yield Indices". I didn't see anything indicating what portion of the 19% non-government bonds is high yield.
Time is your friend; impulse is your enemy. - John C. Bogle

Post Reply