One of the more misunderstood results to come out of the Brinson et al papers is the statement that 90% of a portfolio returns is a result of asset allocation. This paper by Mitch Tuchman gets it wrong. Check the first paragraph under Reducing Risk. 90% of a portfolio return is not tied to asset allocation. What Gary Brinson and his co-authors actually stated in their 1986 paper is found in the following quote.
“Data from 91 large U.S. pension plans over the 1974-1983 period indicate that investment policy dominates investment strategy (market timing and security selection), explaining on average 93.6% per cent of the variation in total plan return.”
Note that critical word, “variation.” Tuchman is not alone in misinterpreting the Brinson research results by leaving out a key word – variation.