NEXT STEPS   So, what do these arguments mean for investors?   First, we must accept that to manage money in a way that reflects the back-to-basics ideas of valuation and diversification, we must be prepared to be different. Portfolios need not always be invested, the benchmark is not necessarily risk-free, and asset allocation should have the freedom and mechanisms to be changed.   Second, we need to think more creatively about what active management can achieve. Not only can it create the additional diversification desired, but it has been proven to add value. We should consider different models – partnerships rather than mandates – and consider allowing capital to return to the portfolio rather than remain invested.   Finally, we need a broader perspective of how the world may look several years from now. Referring to the last 30 years does not provide the most likely range of scenarios – and there is a wide range of potential environments ahead.

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