100-year-portfolio
The note, authored by Inigo Fraser Jenkins with contributions from Alla Harmsworth, Robertas Stancikas and Maureen Hughes, presents a framework for investing with horizons of a century or more. It argues that ultra‑long‑horizon investing is defined more by governance, benchmark choice and process than by a static asset mix. The authors highlight unprecedented path‑risk from artificial general intelligence, climate change, geopolitical upheaval and wealth inequality, which render traditional short‑run risk metrics inadequate. They propose a diversification approach that spans macro‑regimes rather than low‑correlation assets, and they prioritize preservation of purchasing power as the chief benchmark. Empirical evidence shows that equity and bond volatility converge over long holding periods, and the probability of real loss falls sharply beyond a decade, suggesting volatility is a poor risk proxy for long horizons. The paper recommends a strong bias toward real assets—equities as the primary real asset, plus illiquid holdings such as land, timber, infrastructure, and a modest allocation to gold and other non‑fiat stores of value. Liquidity is treated as an option to acquire distressed assets rather than a safety buffer. The authors critique market‑cap weighting for its survivorship bias and argue that long‑run returns are better explained by fundamentals (GDP per‑worker growth, population trends, profit‑share) than by valuation multiples, whose predictive power wanes after 20‑30 years. Demographic slowdown and uncertain AI‑driven productivity gains are incorporated into a growth‑income model that yields modest real return expectations (≈4‑5% for the US). The conclusion stresses mission‑aligned governance, a regime‑diversified allocation, and the acceptance that many traditional risk measures and benchmarks are unsuitable for a 100‑year perspective.
Topics
Governance Over Allocation: The Core of a 100‑Year Portfolio
The authors argue that the decisive factor for ultra‑long‑horizon investing is a robust governance framework—benchmark selection, mission alignment, and decision‑making processes—rather than a fixed asset‑class mix.
Path‑Risk from AI and Climate: Redefining Diversification
Explores how AI breakthroughs and climate‑induced tipping points expand the range of possible economic outcomes, demanding diversification across macro‑regimes instead of traditional low‑correlation assets.
Purchasing‑Power Preservation as the Primary Benchmark
Advocates using real‑return preservation (inflation‑adjusted purchasing power) as the central performance metric, superseding nominal volatility or total return benchmarks.
Long‑Horizon Risk Metrics: Volatility Convergence and Real‑Loss Probabilities
Presents empirical evidence that equity and bond volatility converge after ~26 years and that the probability of a real loss drops dramatically with longer horizons, questioning volatility as a risk proxy.
Real‑Asset Bias and Illiquid Investments for Ultra‑Long Horizons
Recommends a portfolio heavily weighted toward real assets—equities, land, timber, infrastructure—and acknowledges the higher illiquidity tolerance of century‑scale investors.
Liquidity as an Option to Capture Distressed Opportunities
Frames cash holdings not as a safety net but as an option to buy distressed assets when markets are dislocated, emphasizing governance‑driven activation of this option.
Survivorship Bias in Market‑Cap Weighting and Global Equity History
Critiques the default use of market‑cap weighting, showing that historical US‑centric success is a survivorship artifact and that many past major markets have vanished.
Valuation Metrics Across Horizons: CAPE’s Diminishing Power Beyond 20 Years
Analyzes how traditional valuation multiples (CAPE, PE, ERP) explain forward returns up to 10 years but lose explanatory power for 20‑30‑year forecasts.