I read with great interest Devesh Shah thoughts and reasoning on helping to take the international allocation on the endowment he serves on down substantially.
The question I have for him with zero criticism is I have read and watched Nobel prize winners like William Sharpe and Eugene Fama and Fama’s frequent collaboration Ken French suggest that there is very little signal in observations five , ten, or even twenty years out.
Shah who is clearly a very smart person must know that.
In order to move as sharply away from where the global portfolio clears or reaches equilibrium he is in fact making a big tactical bet.
If we enter a period like 2000-2010 where essentially the S&P had zero returns ( not impossible given the elevated valuation of US stocks) the “bet” the board made goes against the idea of being market agnostic.
I’m curious if they aren’t succumbing to recency bias even though the recency has persisted for a very long time?
June 4
