Selestia/Skandia head of investment marketing Graham Bentley has accused Hargreaves Lansdown head of research Mark Dampier of attending the “Vicky Pollard Institute of Asset Allerkation”.
Bentley says Dampier’s view that the importance of asset allocation is overstated is naive.
In Money Marketing rec-ently, Dampier said academic studies show that 90 per cent of investment returns come from asset allocation but said this is only true if you get it right.
But Bentley says getting the decisions right is not necessarily the issue and asset allocation explains 90 per cent of the variability of a portfolio’s returns over time.
He says: “They may teach that at the Vicky Pollard Institute of Asset Allerkation but getting it right is neither here nor there, nor are returns necessarily positive. If your portfolio performs badly sometimes and well at other times, then the vast majority of the successes and mistakes come from asset allocation.”
Dampier, who has also been criticised on the subject by JS&P head of investments Andrew Wilson, says this philosophy proves his point as it takes value away.
He says: “Asset-allocation calls are just too difficult and risky to make. Most people cannot make their minds up whether to invest in the FTSE 100 or the 250 so how can you realistically choose Japan over the US?”
Bentley cites the last bear market as an example of asset classes outstripping fund managers as the main reason behind absolute performance. During that period, 312 of the 315 UK equity funds underperformed while only two out of 59 corporate bond funds made a loss.
Dampier says: “While the statistics on the bear market are correct, the simple truth is that no one could have predicted a market like that going on for the best part of three years.”
Bentley says Dampier’s argument is only true of tactical asset allocation calls which are made through market timing and predictions.