Many investors have been underwhelmed by multi-asset approaches over the last decade, particularly in comparison with very strong returns from simple equity and bond allocations. We explore these returns and explain that traditional risk-adjusted lenses do not allow a fair assessment of what risk was taken ex-ante. The true risk relates to the range of potential outcomes, including all of those which could have arisen (but did not). It is this risk which is most relevant when determining a strategic asset allocation.

In this paper we first look at the recent historical returns (comparing equity/bonds with well-known multi-asset funds), next we explain the outcome in the context of what could have happened.