But Rob Morgan, pension and investment analyst at Charles Stanley, believes that being willing to deviate from the traditional market weightings when creating a portfolio is crucial.
He says: “Look at the differential in performance of the US market versus Japan or Europe over the past decade.
"If you have a fixed asset allocation then that can be a serious disadvantage. It means you’d be closer to benchmark potentially, and there is no guarantee that your manager makes the right macro calls, but returns will be dictated more by asset allocation than stock or manager selection.
"That’s been the case in the past and there’s no reason to expect it to be different going forward. From this point we can no longer rely on every cycle producing a new high in every major stock market and we have to keep under constant review the extent of a market's potential for growth.”
James McDaid says another challenge for asset allocators in the current climate is that not only are policymakers' responses to the crisis unprecedented in nature, the timing of when those policies might end is unknown.
He believes this makes it risky to try to make investments based on buying the asset classes that perform well in periods when policies such as quantitative easing are in force.
Growth pains?
The US is a classic growth market, and has benefited from low interest rates and quantitative easing keeping bond yields low.
Lower bond yields help growth companies as growth companies tend to pay little or nothing in terms of dividends.
If bond yields are rising then investors buy the bonds to get the income, and sell the equities, but with bond yields at close to, or below, zero, the meagre income offered by growth companies looks relatively more attractive.
Low bond yields also tend to mean that the outlook for economic growth and inflation is uncertain, so investors are wary of value stocks, which are more cyclical in nature.
James Davies, investment manager at Close Brothers Asset Management says: “For us, we use a strategic asset allocation to establish the broad parameters of our funds.
"The science part is based on the long term performance of different asset classes, and we then arrive at a more tactical allocation around this based on inputs from a variety of sources ranging from macro-economic data and research, conversation with fund managers, and importantly our own internal investment discussions with the wider Close Brothers Asset Management team.
"The advantage of using active funds is that we are not solely dependent on traditional asset allocation to generate returns, as the alpha from our fund managers has the potential to generate long term performance.
