Bernanke's Personal Portfolio Needs an Overhaul

July 29, 2008 — -- "Good afternoon, Mr. Bernanke. Have a seat, and thanks for coming in today.

"I thought it was time we sit down together to review your portfolio. I'm worried it's grown a little out of balance and needs a bit more diversification than what I've been reading about in the newspapers.

"Can I get you something to drink before we start?"

The above scenario is strictly fantasy. Federal Reserve Chairman Ben Bernanke has never been, nor will he ever be, a client of mine. That much in life I'm sure about.

But if the Fed chairman ever did call upon me for financial planning help, I'd tell him he needs a more broadly diversified portfolio that respects his conservative tendencies but also provides him greater exposure to other asset classes.

It appears the Fed chairman's personal portfolio is dominated by large-cap stocks and fixed-income investments. From what I can tell, Bernanke needs larger slices of mid- and small-caps, international stocks and maybe some real estate.

With his income-earning potential, this is a man who can afford to take on a little more risk.

This assessment is based on news stories written when the Federal Reserve last week released the chairman's financial disclosure form that outlines in broad terms his personal finances. The annual disclosure is mandated by law with the Federal Reserve board members reporting their assets and income within broad ranges rather than by exact figures.

News reports on release of the disclosure form highlighted Bernanke's holdings in Canadian treasury bonds. What caught my eye, however, is the fact that the bulk of his portfolio is tied up in just two funds: a large cap stock fund and a fixed-rate annuity.

The CREF Stock Large Cap Blend fund and TIAA Traditional Bernanke holds are valued each at somewhere between $500,001 and $1 million, the Associated Press reported.

Bernanke, Fed chairman since February 2006, reported total assets ranging between $1.2 million and $2.5 million. That means the CREF stock fund and the TIAA annuity together could account for up to about 80 percent of his overall portfolio, depending upon where the exact asset figures fall within the broad ranges given.