Wednesday, May 14, 2014

Europeans still like bonds?


Mercer provided a breakdown of strategic asset allocation by country in their latest European survey of pension funds. These pension funds do not like equities with an average of only 34% versus bond allocations that are greater than 50%. There is no inflation in the EU and credit spreads have tightened but the absolute yield on bonds is low, so if you want to hit a targeted return of closer to 7-8% you are in trouble. Property allocations are small but outside of the major cities, there is little upside in real estate. The other category which includes alternative investments is going to generate mixed returns between stocks and bonds. 

Is this the allocation of the future or the past?

No comments: