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The Next Wave of Asset Allocation: Stocks and Commodities Futures

In 1986, an article was published in TheFinancial Analysts Journal that changed the investment world. Three researchers - Gary P. Brinson, L. Randolph Hood, and ...

By Staff Writer | Updated on November 01, 2008

In 1986, an article was published in TheFinancial Analysts Journal that changed the investment world. Three researchers – Gary P. Brinson, L. Randolph Hood, and Gilbert L. Beebower (collectively “BHB”) – compared the performance of actively managed pension funds to the performance of index funds. They found that asset allocation choices, not individual security selection, accounted for more than 96% of the variation between active and indexed portfolios.

The research served as rocket fuel for a two-decade boom in asset allocation. Published at an opportune time in the investment industry’s growth, BHB has been used by countless financial advisors to convince clients that asset allocation works over time.

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