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Opalesque Geneva:

In his latest missive, Cliff Asness, co-founder of quant firm AQR, fictionalises the world 10 years from now from an asset allocator's perspective. In it, he warns against over-betting on U.S. public equities, private equity, cryptocurrencies, the wrong active managers, and tail-risk hedging. He is more positive about trend-following and risk parity strategies, value stocks and the better multi-strategy hedge funds.

"Well, sitting here in the year 2035 and looking back at our endowment's returns for the last decade is not a pleasant task. World markets have been subpar and our performance relative to world markets has been simply terrible," he starts, as he looks at the future from an imagined hindsight position.

Investing in U.S. equities at a CAPE in the high 30s turned out to be a disappointing exercise as the CAPE is down to around 20, only beating cash by a couple of per cent per annum over the whole decade.

Inflation ran 3-4% for the decade and U.S. bonds were a bit subpar. The massive public spending and the debt and deficits are just starting to be priced into bond yields.

The global stock market did better with non-U.S. stocks turning in historically healthy real returns (5-6% p.a. over cash). Even if the U.S. had the best companies, paying a multiple for the U.S. "compared to the rest of the world mattered somewhat more......................

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