A Division of Windham Capital Management, LLC

Market Portfolio Weights

How are the market portfolio weights derived?

Answer
These weights are user specified. Usually, the Windham Software defaults these weights to the same allocation specified in the benchmark column in the Defined Portfolios screen.

Windham Market Portfolio
We suggest using a global cap weighted market portfolio. Here are estimates of a market cap weighted portfolio of stock, bonds, and commodities used in Windham’s Global Market Portfolio:

13.53% US Stocks
7.65% Foreign Stocks
9.84% Emerging Markets
19.54% US Bonds
27.42% Foreign Bonds
4.37% US Property
10.52% Foreign Property
7.12% Commodities


Windham’s capitalization weighted global market portfolio is intended to represent the world’s equilibrium allocation of risky assets. To create this portfolio, we first defined nine asset classes: US Equity, Foreign Equity, Emerging Equity, US Bonds, US Real Estate, Foreign Real Estate, and Commodities. We then used the sources below to value each of these asset classes:

  • For equity markets, we used the World Federation of Exchanges total world market capitalization.
  • We valued fixed income markets by total value of outstanding issues reported by the Bank of International Settlements.
  • We relied on Prudential Real Estate Investors’ research to measure the size of the world’s real estate markets.
  • We valued global commodity markets by referencing the production based methods used by the S&P GSCI Commodity Total Return Index.

In an effort to reduce double counting, we did not treat hedge funds as an individual asset class. Private equity was excluded due to its relatively small size in relation to global equities.


Notes

  1. These market weights were updated on July 14, 2016 in the Windham Time Series database.
  2. The current asset values are based on research as of December 31, 2015.


Related Articles

  1. The Windham Global Market Portfolio - more information
  2. Equilibrium Returns


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