David Blanchett, CFA: The Role of Commodities in Portfolio Allocation

·26 min·2 clips

David Blanchett's new study argues commodities belong in portfolios, overturning decades of investment wisdom.

The episode features Dr. David Blanchett discussing his paper 'Investment Horizons, Serial Correlation, and Better Retirement Portfolios.' He begins by explaining the research questions, focusing on how serial correlation affects portfolio construction over different time horizons. Blanchett clarifies that time diversification is misunderstood, noting investments become riskier over longer periods, not safer. He describes using bootstrapping methods to test serial correlation, finding optimal equity allocations increase from 50% to 70% over 20-year horizons. The conversation covers international data from 15 countries spanning 1870 to 2020, showing varied results. Blanchett addresses Ed McCrory's work on equity risk premiums, agreeing future premiums are uncertain. He extends the analysis to small and value factors, showing they also gain allocation appeal over time. The discussion then shifts to commodities, highlighting their historical 600 basis point underperformance versus equities. Blanchett argues commodities become valuable over longer horizons as inflation hedges, with allocations reaching 20-25% for moderate investors. He emphasizes this is strategic, not tactical, and relevant for retirement planning. The episode concludes with Blanchett's career advice and his role at PGMDC Solutions, where they implement high allocations to real assets.

As heard by us

A research-led discussion of time horizon, return patterns, and commodities in retirement portfolio design.

Portfolio construction changes once time is treated as part of the problem. The host's conversation with Dr. David Blanchett, CFA, works through research on investment horizons, serial correlation, and inflation before making room for a retirement-focused case for commodities.

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Why you'd press play

Want a research-minded guide to why retirement portfolios can look different once time horizon, inflation, and commodities enter the room?

Read the full recommendation in PlayNext →

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