SOURCE: Catalyst Equity Research Inc.

Catalyst Equity Research Inc.

November 23, 2011 11:01 ET

Modern Portfolio Theory Requires a Post-Modern Update: Precious Metals Are Mandatory in "Efficient Frontier" Asset Mix

TORONTO--(Marketwire - Nov 23, 2011) - Gold, silver and platinum have singularly outperformed several major widely accepted investment indexes over the last 10 years, yet many client portfolios completely ignore this best-performing asset category, says a new report from Toronto-based Catalyst Equity Research Inc. This is despite the fact that investment professionals have a fiduciary responsibility to meet liabilities for the pension plans and future retirement needs of their clients by managing funds in a responsible and competent manner.

"The traditional view of portfolio management is that three asset classes, stocks, bonds and cash, are sufficient to achieve diversification. This traditional view is quite simply incorrect, and it has cost investors and pensioners dearly over the last decade alone," states Robin Cornwell, the founder and principal shareholder of Catalyst. "Post-modern, efficient frontier portfolios are optimal in both the sense that they offer maximum expected return for some given level of risk and minimal risk for some given level of expected return. Typically, portfolios that comprise the efficient frontier are the ones most highly diversified."

For thousands of years, gold and silver have provided a reliable way to secure wealth. The simple reality is that many investment professionals do not recognize precious metals as an asset class. A direct physical allocation in precious metals provides an unencumbered investment with (i) no counterparty risk, (ii) sufficient liquidity for large investors, and (iii) no dependence on management for performance.

Today only 0.30% (less than one-third of 1%) of pension fund holdings are in gold; half of that amount is invested in gold mining stocks, not physical bullion. Including physical precious metals improves the efficient frontier.

The allocation to precious metals does not come at the expense of any single asset class, but rather from a reduction in several asset classes. Catalyst Equity Research suggests that the unique risk and reward profile of precious metals may make them a useful diversification tool in strategic asset allocations. Clearly, precious metals have an important role to play in asset management allocation practice.

The report goes on to state that bullion provides insurance against failure of all other investments, offers improved liquidity and is the only asset class (excluding cash) with a positive correlation coefficient with inflation. It is, therefore, the only asset class that can provide protection from a systemic crisis.

Reporters and editors can access this new special report from Catalyst Equity Research at www.catalystbullionreport.com. A previous report discussing various bullion products is also available for download.

About Catalyst Equity Research
Catalyst Equity Research Inc. was founded in 2003 and is located in Toronto. Catalyst is the only independent equity research company in Canada specializing in the financial services sector. Catalyst offers over three decades of industry experience founded in both financial analysis and investment banking. Industry groups include chartered banks, trust companies, insurance companies, mutual fund companies and investment counselors. For more information on Catalyst products and services, please visit: www.catalystresearch.ca.

Contact Information

  • Media Contacts:
    Robin Cornwell
    Founder, Principal Shareholder
    Catalyst Equity Research Inc.
    Phone: 416-910-7985
    Email: Email Contact

    Jill McCubbin
    Conversation Architect
    market2world communications inc.
    Phone: 613-256-3939
    Email: Email Contact