In my work, I read a lot every day. I just finished reading a 19-page report by AllianceBernstein on the 100-year portfolio, with plenty of interesting charts and data.
There is always something new to learn. Sometimes, even after years in the market, a good report can still make you stop and think.
Here is a section without the charts:
Investing for ultra-long horizons forces investors to consider risks that, rightly, do not enter return forecasts over normal horizons. For example, AI’s potentially positive influence includes the ability to increase productivity and the market clearly tries to price the most likely outcome for this enhancement.
AI also comes with potential negatives, such as the likelihood of greater wealth inequality as well as questions about their impact on politics and geopolitics. We have argued that it would be wrong to include these potentially negative forces in a return model for assets as markets rarely price such “existential” risks ex ante.
Arguably, maybe they do need to be incorporated into ultra-long horizon approaches. This might be expected to lower long-term returns of risk assets. Likewise, there are issues discussed in bond markets around fiscal sustainability and the potential limits of public debt levels.
The rejoinder to such concerns is often that such problems can be “kicked down the road.” But on ultra-long horizons, presumably It is harder to dismiss such concerns. An ultra-long investment horizon today should be addressed in part by some explicit views about how the strategic outlook is likely to differ from the investment environment that has dominated the investment careers of most people in finance today and in part by a view on the process and goals of investing.