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Global Capital Stock 2005-2014: A Natural Benchmark for Multi-Asset Portfolios

6 October 2015
by Guest author

global capital stocksAndrea Vacchino and Markus Schuller, Panthera Solutions

How can you know whether a multi-asset portfolio is well managed? Many institutions have policy indices built according to the investment management’s preferences and expectations on risks and returns associated to each asset class. Other institutional investors run peer group comparison between multi-asset managers or measure their portfolio against total return indices. But these are workarounds only. Surprisingly, there is no policy portfolio benchmark investors can use at the very beginning of multi-asset investment against which to measure later decisions.

Even seven years after the Great Recession, the world is still suffering significant data gaps in its understanding of the Global Capital Stock, so we decided to build an objective, multi-asset, market-weighted policy portfolio index, based on the measures of the global capital stock.

Initially, we focused on measuring the current stock of different assets worldwide, a big challenge since only limited primary or secondary research is available. We looked especially at illiquid global stock components such as real estate, land and private equity, thanks to the contribution of several international institutions such as the OECD, BIS, Global Data Gaps Initiative, SME Europe, the European Commission and (hedge) fund managers like Strategos Capital Mgmt. Due to their support, we gained access to data or won insights on data interpretation and manipulation. At this point we would like to sincerely thank all the institutions and fund managers who supported our project.

This was the most comprehensive research conducted in the field so far, but was only the beginning of an ongoing optimization process. We concentrated on the Global Capital Stock of 11 assets and their major changes since 2005 because pre-2005, the tradeoff with regards to the quality and availability of data would have been too unfavorable. It’s only in recent years that academia has benefitted from the increasing reach and quality of databases like OECD Stats. We want to highlight research on specific asset classes in certain geographies such as New Estimate of Value of Land of United States (Larson, 2015). We used this kind of work not just for retrieving data but also to interpolate applicable findings to other uncovered areas.

The two figures below visualize our findings when measuring the Global Financial Stock per asset class, firstly expressed as percentage and then in Trillions of USD (click to see full size).

Asset allocation

Asset allocation

Outstanding trillion USD

Trillion USD

The graph below plots the evolution of nonsecuritized loans in terms of geographic exposure. We would like to highlight the growing weight of China and the relative decline of Japan as a result of the rebalance in the global economies.

Nonsecuritized loan composition


Lastly we tested the performance of the Policy Portfolio against a global 60-40 portfolio and the gestaltu portfolio, which represents an alternative liquid market portfolio.

By comprehensively measuring the Global Capital Stock and its two byproducts, the Policy Portfolio and the investable policy portfolio, we understand our research as a first step towards reliably defining a natural benchmark for multi-asset portfolios. When comparing a multi-asset portfolio with the policy portfolio, one can derive preliminary conclusions on asset managers’ active decisions in terms of their strategic asset allocation configuration.

The limitations of our research revolve around the margin of error in measuring the Global Capital Stock. However we feel strongly optimistic about future development about data gap initiatives which will further reduce the margin of error.

We will continue our efforts on searching for better measures of the Global Capital Stock, for finding better indices to covering the Global Capital Stock for the Policy Portfolio, and for converting the Policy Portfolio into an Investable Policy Portfolio. The results of our ongoing optimization process will be accessible through the quarterly publication of the PS Policy Portfolio Index.

Useful links

For fuller details of the methodology and findings, see the report this article is based on here or click on the cover page above.

Capital stock data at the OECD – status and outlook Paul Schreyer et al, OECD (2011, Word document)

OECD work on financial statistics

OECD work on productivity statistics


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