Mon, Feb 15, 2016
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

Diversification may not be key according to Towers Watson

Tuesday, July 24, 2012

Beverly Chandler, Opalesque London: Robin Penfold and Craig Baker of Towers Watson have arrived at the conclusion that diversification is not necessarily key in equity investors’ portfolios. The pair presents their findings in their paper, Concentrated equity products, why we generally prefer them to diversified products for a typical investor’s portfolio, reporting that adding skilled active management increases expected return without much change in total risk. "We therefore encourage equity investors to seek products with higher expected returns. That means concentrated rather than diversified products" they conclude.

The choice between focussed or diversified investment stems from the investor, the authors write. "Most investors want to improve the return efficiency of their entire portfolio. We call this a 'portfolio-level preference’. That requires them to consider the contribution of asset allocation and active managers. We generally find that using skilled active managers helps to improve overall investment efficiency. That is because expected active returns add to expected asset returns, whilst overall risk barely changes with the introduction of active risk. We therefore expect active management to have positive marginal impact on overall risk-adjusted return."

Penfold and Baker believe that if all other things are equal, investors wit......................

To view our full article Click here

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Investing - Real estate secondaries sole 'bright spot' in 2015, As hedge funds stumble, one firm prepares to buy illiquid stakes[more]

    Real estate secondaries sole 'bright spot' in 2015 From IPE.com: The secondary market for property was the sole “bright spot” over the course of 2015, as hedge fund secondaries saw deals fall by two-thirds, according to a wide-ranging survey of the market. Setter Capital said 2015 saw th

  2. Asia - Hedge fund manager Kyle Bass estimates China's foreign reserves below critical level[more]

    From Nasdaq.com: Investor Kyle Bass stepped up his attack on China's currency, arguing in an investor letter distributed Wednesday that the second-largest economy's foreign reserves are "already below a critical level." The comments mark the latest effort by hedge funds and other investors to raise

  3. Investing - Some hedge funds want to make subprime auto loans next big short, 11 hedge funds that are “all in” on the FANG stocks, Hedge funds short London luxury homes, Cynet raises $7 million from U.S. hedge fund[more]

    Some hedge funds want to make subprime auto loans next big short From Bloomberg.com: A group of hedge funds, convinced they have found the next Big Short, are looking to bet against bonds backed by subprime auto loans. Good luck finding a bank willing to do the trade. Money manage

  4. Investing - Hedge funds see selloff in European bank stocks as buying opportunity[more]

    From WSJ.com: The massive selloff in European bank stocks and bonds is overdone and presents a “phenomenal” buying opportunity, according to some of Europe’s top hedge-fund managers. Despite a 28% slump in European bank stocks this year, including a 38% fall in Deutsche Bank AG and a 34% drop in Soc

  5. Legal - Carlyle accused of fraud by ex-employee, Hedge funds win CDS breach of contract suit against Deutsche Bank, Hedge fund asks for OK on $27.5m Goldman CDO deal, SFO examines Barclays hedge fund profits[more]

    Carlyle accused of fraud by ex-employee From AI-CIO.com: A former portfolio manager claims he was fired for blowing the whistle on “crazy” and “irresponsible” investments. Carlyle Group has been sued by a former portfolio manager for one of its hedge funds, who accused the firm of “knowi