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This book is based on the sessions that Martson has developed for the CIMA program as well as for Morgan Stanley's Senior Consultants Program begun at Wharton in the mid-1980s even before the CIMA program began. The book is designed for top investment advisors who want to provide diversified portfolios for their clients, whether they are high net worth private clients or institutional investors. The book examines all of the major asset classes that go into modern portfolios and asks how much they add to portfolio diversification.

RICHARD C. MARSTON is currently James R.F. Guy Professor of Finance and Director, George Weiss Center for International Financial Research at the Wharton School, University of Pennsylvania. He was a recipient of the Rhodes Scholarship, Fulbright Fellowship, and the Sanwa Bank Prize in International Finance. He has been a research associate for the National Bureau of Economic Research since 1979, a visiting professor at London Business School, ESSEC in Paris, and the Sasin Institute at Chulalongkorn University in Bangkok, and Visiting Scholar at the Bank of Japan. Since 1999, he has been Academic Director of the Private Wealth Management Program at Wharton, a week-long program for ultra-high-net-worth investors, and he is a long-standing faculty member in the Certified Investment Management Analyst program at Wharton, having taught asset allocation to over 5000 financial advisors.

Preface	p. xiii
Acknowledgments	p. xv
About the Author	p. xvii
About the Book	p. xix
Disclaimers	p. xxi
Asset Allocation	p. 1
Ingredients of Asset Allocation	p. 3
Lessons of the Recent Downturn	p. 6
So Are Bonds the Place to Invest?	p. 10
So What Happens When the Economy Turns Up?	p. 13
Some Necessary Tools for Analysis	p. 15
Appendix: Description of the Statistical Tools	p. 16
Long-Run Returns on Stocks and Bonds	p. 21
Stocks and Bonds Since 1951	p. 22
How Much More Attractive Are Stocks than Bone	p. 24
Real Returns	p. 25
Reconsidering Bond Returns	p. 27
Reconsidering Stock Returns	p. 30
Alternative Estimates of Long-Run Stock Returns	p. 32
Upper and Lower Bounds for Equity Returns	p. 35
Appendix: Alternative Estimates of Stock Returns	p. 36
Small-Cap Stocks	p. 41
What Do We Mean by Small-Cap Stocks?	p. 43
Relative Performance of Large-Cap and Small-Cap Stocks-Russell Series	p. 45
Relative Performance of Large-Cap and Small-Cap Stocks-SBBI Series	p. 48
Relative Performance of Large-Cap and Small-Cap Stocks-Broader Analysis	p. 50
Large-Cap and Small-Cap Stocks in a Portfolio Context	p. 52
Summary-Key Features of Small-Cap Stocks	p. 55
Value and Growth Investing	p. 57
Description of the Russell 1000 Indexes	p. 57
Relative Performance of Growth and Value Indexes	p. 59
Value and Growth Indexes for Earlier Periods	p. 64
Relative Performance of Small-Cap Growth and Value Stocks	p. 65
Portfolios with Growth and Value	p. 69
Summary-Key Features of Growth and Value Stocks	p. 71
Foreign Stocks	p. 73
Returns on Foreign and U.S. Stocks	p. 75
Currency Capital Gains and Foreign Stock Returns	p. 79
Diversification Benefits of Foreign Stock Investing	p. 85
Are There Shortcuts to Owning Foreign Stocks?	p. 90
Summary-Key Features of Foreign Stocks	p. 93
Emerging Markets	p. 97
What Is An Emerging Market?	p. 98
Emerging Stock Market Indexes	p. 101
Emerging Stock Market Returns	p. 103
Risks of Investing in Emerging Stock Markets	p. 107
Emerging Market Bonds-A Brief History	p. 113
Returns on Emerging Market Bonds	p. 114
Summary-Key Features of Emerging Market Stocks and Bonds	p. 117
Bonds	p. 121
Treasury Bonds	p. 122
The Wider U.S. Bond Market	p. 127
Returns on U.S. Bonds	p. 131
Bond Markets Outside the United States	p. 133
Summary-Key Features of Bonds	p. 140
Strategic Asset Allocation	p. 143
Expanding the Portfolio to Include Other Bonds and Stocks	p. 145
Expanding the Portfolio to Include Foreign Stocks	p. 147
The Dirty Secret of Optimization	p. 150
Alternative Approaches to Optimization	p. 154
Estimating Portfolio Returns-the Premium Method	p. 155
Portfolios in Practice-Example of MarketWatch.com' Lazy Portfolios	p. 159
Beyond the Traditional Efficient Frontier	p. 163
Hedge Funds	p. 167
Investment Strategies	p. 169
Hedge Fund Returns	p. 172
Hedge Fund Biases	p. 178
Performance Across Managers	p. 181
Fund of Funds	p. 182
Hedge Funds in a Portfolio	p. 186
Summary-Key Features of Hedge Funds	p. 187
Venture Capital and Private Equity	p. 191
Common Features of Venture Capital and Buyout Funds	p. 192
Venture Capital	p. 195
Returns on Venture Capital	p. 198
Buyout Funds	p. 205
Returns on Buyout Funds	p. 207
Key Features of Private Equity	p. 211
Real Assets-Real Estate	p. 213
Real Estate Investment Trusts	p. 214
Direct Ownership of Real Estate	p. 220
Home Ownership	p. 223
Concluding Remarks	p. 231
Real Assets-Commodities	p. 235
Sources of Return on Commodity Futures	p. 236
Returns on Commodity Futures	p. 239
Performance in a Portfolio	p. 245
Does Gold Belong in the Portfolio?	p. 249
Active Investment in Commodities-Managed Futures	p. 251
Summary-Key Features of Commodity Investments	p. 253
Asset Allocation with Alternative Investments	p. 257
Diversifying into Real Estate-Alternatives for Ordinary Investors	p. 258
Expanding the Menu of Alternative Assets	p. 262
High Net Worth (HNW) Portfolios	p. 264
Ultra HNW Portfolios	p. 266
Lessons about Alternatives from the Yale Endowment	p. 269
Lessons about Alternative Investments Learned in the Financial Crisis	p. 277
Verdict on Alternative Investments	p. 280
Investing and Spending by Foundations	p. 285
Spending Rules	p. 286
Estimating Future Bond and Stock Returns	p. 288
Volatility and Uncertainty	p. 288
Portfolios of Stocks and Bonds	p. 290
Description of the Spending Plan	p. 291
Using Historical Returns Since 1951 to Set Spending Rules	p. 292
Effect of Lower Stock Returns on Spending Rules	p. 294
Effects of Different Stock/Bond Allocations	p. 296
Concluding Comments	p. 299
Investing and Spending in Retirement	p. 303
Longevity	p. 306
Spending Rules for Retirement	p. 308
Portfolios of Stocks and Bonds	p. 309
Baseline Case: Can Two Live More Cheaply Than One?	p. 310
Effects of Bequests and Variable Spending Rules	p. 311
How Can I Turn a Defined Contribution Plan into Defined Benefit Plan?	p. 313
Concluding Comments-Postpone Retirement?	p. 314
The Discipline of Asset Allocation-Rebalancing	p. 319
Rebalancing Defined	p. 320
Rebalancing When Times Are Good	p. 321
Rebalancing When Times Are Bad	p. 323
References	p. 325
Index	p. 33
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Portfolio Design : A Modern Approach to Asset Allocation

047093123X

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