2009 Callan Periodic Table of Investment Returns

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Investment consultant firm Callan Associates created a neat visual representation of the relative performance of 8 major asset classes over the last 20 years. You can find the most recent one below (click to view PDF), which covers 1989 to 2008. Each year, the best performing asset class is listed at the top, and it sorts downward until you have the worst performing asset. You can find previous versions here.

Lessons Learned?
It is always interesting that us humans tend to try and find patterns in everything. Make your eyes shift out of focus for a bit, and most of the table looks pretty random. What is top could easily end up back at the bottom. Callan says that the table shows the value of diversification.

But I also see some streaks. Let’s look at the white boxes of MSCI EAFA, which is an index following major developed international (non-US) countries. From 1989-1992 it was in the the dumps, and then from 1993-1994 it was tops. Then there are the pink boxes of the S&P 500 Growth. From 1994-1999 it was either 1st or 2nd. For the next 7 years from 2000-2006, it was nearly last.

What do we learn then? Mostly, that there are no reliable patterns. If we simply bet against what was hot last year, we could get burned for 6 more years. If we just follow what is hot, we probably get crushed too. I bet I can guess where most investor money was flowing at the end of each of these streaks…

Also, while the table compares relative performance, you can also note that absolute performance changes all the time as well. In 2008 the “best” asset class only went up 5.25%, while in 1989 and 1995 the “worst” asset class went up over 10%. Sometimes you just can’t win, and other times you just can’t lose.

For the most part, it makes me laugh at all the predictions I hear. We’re almost halfway done with this year. Who wants to guess what the breakdown for 2009 will look like?

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  1. Here are some YTD numbers for 2009:
    Russell 2000 Growth: +10.86%
    S&P 500 Growth: +9.16%
    MSCI EAFE: +6.91%
    Russell 2000: +6.12%
    S&P 500: +2.98%
    BC Agg: +1.54%
    Russell 2000 Value: +1.46%
    S&P 500 Value: -1.57%

    So far this year has been good for growth and small cap.

  2. This is a great find! This will come in handy trying to explain the value of diversification, or asset allocation to my family members. Thanks!

  3. watch the movie pi, it will explain everything 🙂

  4. The Callan chart always brings back memories of my early days of investment advisory work (1998). I studied the Callan chart for hours looking for (and seemingly finding) patterns.

    The lessons I learned from the chart and attempting to add value as a money manager for my clients was that the attempt to “beat the market” only increased the odds of losing to it.

    I also learned that an investor can “find a pattern” anywhere if they look hard enough. If the investor finds something that works for a month, a year or even a few years, their over-confidence can kill them later when the pattern no longer applies (or the investor discovers there never was a pattern).

    While the markets are not absolutely random, and finding inefficiencies is certainly possible, the effort spent and added risk in attempting to “beat the market” is not worth it (unless the investor simply loves the research and enjoys the process).

    “A hidden connection is stronger than an obvious one.” ~ Heraclitus (c.536-470 BC)

    “Too keen an eye for pattern will find it anywhere.” ~ T.L. Fine

  5. A small tweak that would be of interest is to have a line marking positive vs negative return running through the table. That way you can tell a rising tide for all boats vs a true selective return environment. Like you said, “worst” is ’95 was 11% but “best” in ’08 was 5%!

  6. This is a little off-topic, but I dumped the data into Excel and looked at the IRR for each asset class (with a constant contribution on the first of every year). They worked out to:

    Russell 2000 Value: 8.88%
    BC Agg: 6.52%
    Russell 2000: 5.99%
    S&P 500 Value: 5.51%
    S&P 500: 5.40%
    S&P 500 Growth: 4.96%
    MSCI EAFE: 2.73%
    Russell 2000 Growth: 2.42%

    If you ignore 2008 (wish that was possible), you get:

    Russell 2000 Value: 12.61%
    S&P 500 Value: 10.49%
    Russell 2000: 10.23%
    S&P 500: 10.07%
    S&P 500 Growth: 9.33%
    MSCI EAFE: 8.32%
    Russell 2000 Growth: 7.27%
    BC Agg: 6.63%

  7. It would be interesting to find ETFs for each of these asset classes and then create a diversified portfolio with the ETFs. Rebalance the portfolio once every year and then you are good. This could be a good topic for a future post.

  8. The Callan table is great. But I also like this similar table from IFA that includes asset classes such as REIT, Emerging Markets, and International Value.


  9. Tyrone Biggums says

    This annual table always illustrates the same principle: investors who chase returns are playing a losers’ game. Sadly, this is how Joe Sixpack invests.

    The key is to develop an asset allocation and stick to it, no matter how markets are doing. I overweigh small value due to better long-term returns also. Most common investors ignore value, and stick to growth because they are misled by the category names. They think growth funds have the best returns, when in fact, they have among the lowest.

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