We have backfilled the GOCMX well ahead of schedule and are turning our attention to studying the feasibility and attractiveness of an unconstrained model. (The original index avoids the garbage-in, garbage-out problem by setting maximum and minimum allocations for each asset category, as any investor would in practice.)

In the meantime, and as the massive wave of subprime-related write-downs rolls on, we thought we would provide a snapshot of our current multi-category allocation.

How to use the above? We view the allocation as representing a starting point for analysis — the baseline allocation (a) from which active managers would diverge as events and expectations warrant, or (b) which passive managers would simply track. It is, in brief, the global-macro portfolio we would seek to build as of today, and the single allocation strategy that would have resulted in the most attractive risk-adjusted return recently (more on that in future posts). The chart essentially represents our allocation policy.

Equities have not been so underweighted since September 2003, reflecting the weakness in most worldwide stock markets over the last year (with a few exceptions, such as China and Hong Kong) and, especially, year-to-date.

From here, we will begin to define the optimal allocations within each “slice” of the pie with more granularity (e.g., sectoral, geographic, individual currencies and commodities, etc.). ♦