Article: Portfolio Optimisation (Equities, Bonds, Domestic & International)

Came across this article.
Portfolio Optimisation (Equities, Bonds, Domestic & International)

Anyone have an idea why it appears to have had a better risk adjusted return using US bonds and basically no Australian bonds.

 

Interesting conclusions. One for @dunno but he’s still too busy sulking after being punished for being a naughty boy swearing in public:

 

As an Aussie he doesn't mention which US Bond fund he's using in his findings?

 

Had a quick glance, I think it’s 10 Year Treasury Bonds:

Safe Withdrawal Rates for Aussies – Part 2: Building and validating a data set (updated) • Ordinary Dollar

 

Thanks @Nodrog

Had a quick look to compare on 10 years for each, I must be off track though

S&P U.S. Government Bond 10+ Year Index

-4.46 %

S&P U.S. Treasury Bond Index

1.74 %

S&P/ASX Australian Government Bond 10+ Year Index

6.37 %

Also had a look here on 10 year government bonds

Bloomberg US

Bloomberg AU

Ordinary Dollar needs to dumb it down for me

 

He he, yep same for me @Redwing. I’m happy to stay local for the risk free allocation of our portfolio. If Australia’s credit rating turns to crap and bank deposits look risky then maybe I’ll consider international bonds. I continue to marvel at the ability of investors to complicate things.

Meantime I’m happy with Term deposits (Gov’t Guaranteed albeit not iron clad but god help us if not). In a low interest rate environment even 0.20% fee for the Vanguard Global Bond Fund is a decent chunk. Term deposits don’t incur any fee. I’m getting around 2.8% for our Term Deposits at present which are mostly in a low / no tax environment being the SMSF pension. Hence by staying short and minimising tax our risk free component has potential to maintain its value against inflation.

So for the year 2.8% for our term deposits vs -0.13% for Vanguard hedged Global Bond Fund:



I’ll keep it local, fee free and simple thanks.

 

It sounds like you might be mixing up "10 Year Treasury Bonds" with meaning the last 10 years?
Also if I recall correctly, he the bonds he was referring to was unhedged US bonds, of which I believe is not available on the ASX, only on other exchanges, but I was more interested on what possible reasons could it be that better risk adjusted return were found using US bonds and basically no Australian bonds over this very long period.

 

Hedging Global Bonds is generally the rule of thumb. Plenty of reasons why available on the net. Search Vanguard white papers for a start.