The concept of a world market portfolio features prominently in many financial theories and models and serves as an important foundation of our asset allocation work for our clients. The world market portfolio is the collection of all assets available to investors in proportion to their relative market value. Therefore, information about the market portfolio:
- Describes the aggregate portfolio of all investors
- Describes the investment opportunity set
- Can serve as a neutral or starting point when establishing long-term asset allocation policies based on circumstances and objectives (e.g., risk, liquidity, time horizon), or views driven by information that is better than everyone else’s (e.g., long-term capital market forecasts, medium-term views)
- Can serve as a benchmark for strategic asset allocation
To learn more, read the article above.