dissenting

I take exception to your colleague, David Ingram's assertion in the piece Better Business: Model Behaviour in ifaonline.co.uk below: There is very little dissent from the view that correct asset allocation is key to maximising the potential returns from an investment portfolio. Research (Nobel Prize winner Harry Markowitz ‘Portfolio Selection') suggests that asset allocation can account for around 90% of the return from investments. The research I think he is referring to is not by Markowitz at all, but by Gary Brinson et al. A better survey of this research, by Ibbotson and Kaplan, can be found at http://www.investmentintelligence.ie/docs/importanceofassetallocation.pdf Asset allocation may account for around 90% of the variation in returns from investment under certain assumptions, but that is not the same as suggesting it accounts for around 90% of the absolute return. In summary, I would include myself among the dissenters."

Posted by: George Kirrin

Model portfolios

Thank you for a very interesting article. There is no doubt in my mind that model portfolios will play an increasing role, but it remain important to have the flexibility to operate outside of these models for individual investors. Trying to apply model portfolios in a 'one size fits all approach' cannot always result in suitable advice for individual clients. I also share the views of the comment below about the use of academic research when it comes to supporting investment arguments. The asset allocation research is often misquoted. We also see academic research misunderstood when it comes to the use of passive funds. I would urge anyone who finds themselves firmly in an 'evangelical' investment camp to read more widely and find the counter arguments for the purpose of balance.

Posted by: Martin Bamford