Model Portfolios for 2002

Our first set of model portfolios is based on an investor who seeks to maximize returns, while taking on the same amount of risk as the benchmark portfolio:

Benchmarks:	80% Domestic Equities and 20% Domestic Debt	60% Domestic Equities and 40% Domestic Debt	20% Domestic Equities and 80% Domestic Debt
Domestic Investment Grade Bonds	0%	12%	55%
High Yield Bonds	0%	5%	3%
TIPS	0%	0%	10%
Non-US Bonds	0%	5%	0%
Commodities	10%	10%	5%
US Equities	55%	47%	16%
REITS	3%	6%	5%
European Equities	25%	10%	6%
Pacific Equities	0%	0%	0%
Emerging Market Equities	7%	5%	0%
Total	100%	100%	100%

Our second set of model portfolios is based on an investor who seeks to minimize risk, while matching the returns of the benchmark portfolio:

Benchmarks:	80% Domestic Equities and 20% Domestic Debt	60% Domestic Equities and 40% Domestic Debt	20% Domestic Equities and 80% Domestic Debt
Domestic Investment Grade Bonds	5%	14%	40%
High Yield Bonds	0%	5%	8%
TIPS	0%	15%	25%
Non-US Bonds	0%	0%	0%
Commodities	10%	5%	5%
US Equities	58%	45%	10%
REITS	10%	6%	4%
European Equities	17%	10%	8%
Pacific Equities	0%	0%	0%
Emerging Market Equities	0%	0%	0%
Total	100%	100%	100%

Our third set of model portfolios is based on an investor who seeks to achieve a minimum compound rate of return over twenty years with a certain level of probability, while taking on as little risk as possible.

Goal:	99% porbability of achieving 6% CR	95% probability of achieving 8% CR	90% probability of achieving 10% CR	85% probability of achieving 12% CR
Domestic Investment Grade Bonds	40%	0%	0%	0%
High Yield Bonds	5%	10%	2%	0%
TIPS	35%	28%	25%	0%
Non-US Bonds	0%	15%	0%	0%
Commodities	5%	8%	6%	10%
US Equities	5%	7%	39%	50%
REITS	5%	6%	2%	10%
European Equities	0%	20%	18%	25%
Pacific Equities	0%	3%	0%	0%
Emerging Market Equities	5%	3%	8%	5%
Total	100%	100%	100%	100%

Finally, we should note that it may be possible (though as we have written over the past year, it is certainly not guaranteed) to further enhance returns within some asset classes by employing different tilts. Examples of this might include a tilt toward value within any broad equity asset class, or toward intermediate maturities within a broad fixed income asset class.

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