Over the decades, investors’ ideas about how to build the perfect investment portfolio have evolved. Large independent pension fund investors have typically led the way, with consultants and smaller pension funds following, and then discretionary private client wealth managers followed by individual retail investors echoing trends as they trickle down. Markowitz is identified as the architect of modern portfolio theory and, to an extent, over time investors have been working with and adapting this theme to their portfolios. In the 1970s, perhaps a function of the high interest rates available at the time, many institutional and pension investors still focussed on fixed income. In the 1980s many of these investors started investing in domestic equities, and the 60/40 equity and bond split within portfolios became more common, as investors recognised the diversification benefits that the two asset classes brought to a portfolio when combined. The 1990s saw further diversification, and international equity investing became mainstream. In the new century, institutions started to further diversify portfolios, adding investments in alternative asset classes such as private equity, hedge funds, real estate, and other alternative or illiquid assets.
