Neil Hokanson of Solana Beach’s Hokanson Associates likes the predictability of high-quality bonds. However, quality stocks are paying good dividends now; he wouldn’t argue with a portfolio that is 50 percent in equities. He likes commodities. “If a committee is concerned about inflation, commodities would be one tool in its quiver,” says Hokanson. He has a problem with venture capital, hedge funds, private equity funds, and the like. “The trouble is opacity. If you don’t know what is going on and don’t understand it, you are gambling with investors’ money.”
Welsh thinks a pension fund should constantly re-evaluate its portfolio — not set targets once a year or so. “We will probably be in a volatile environment for the next five to ten years. It will be so unpredictable, the only constant will be staying on your toes and being flexible — not being married to one scenario,” he says. “So the fiduciary of a pension fund should look at asset allocation on a regular basis.”
Listen to Don Bauder discuss this further on Reader Radio.