Twenty years ago, Mark authored an article published in The Journal of Portfolio Management titled "Thinking Outside the Benchmark" to describe a new way of pension fund management. He concluded the following:
- Pension plans need to eliminate the restrictions associated with traditional asset allocation.
- Traditional asset allocation models partition the financial markets into convenient benchmark boxes, but these boxes can inhibit alpha extraction.
- Look for investment opportunities that fall between the benchmark boxes of traditional asset allocation and are driven by economic factors rather than asset class descriptions.
- Pension funds should deemphasize their investment organizational structure along traditional asset class lines. Build teams of investment staff that bridge asset classes.
- Consider the risk of peer group underperformance. Strict asset allocation reduces the risk of underperformance compared with standard benchmarks, but it also reduces the opportunity to outperform a peer group.
- Focus of the total return of the pension portfolio rather than individual asset classes.
Read more on how these concepts are incorporated into a framework today known as the total portfolio approach or TPA in the full article.