Thu, Mar 28, 2024
A A A
Welcome Guest
Free Trial RSS pod
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

Previous Opalesque Exclusives                                  
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. KKR raises $6.4bn for the largest pan-Asia infrastructure fund[more]

    Laxman Pai, Opalesque Asia: The New York-based global investment firm KKR has raised a record $6.4bn for its second Asia-focused infrastructure fund, underlining investors' continued appetite for private markets. According to a media release from the alternative assets manager, the figure top

  2. Bucking the trend, top hedge fund makes plans for a second SPAC[more]

    From Institutional Investor: SPACs aren't dead. At least not to the folks at Cormorant Asset Management. The life sciences firm, whose hedge fund topped its peers in 2023, is confident it will match the success of its first blank-check company. Last week, the life sciences and biopharma speciali

  3. Benefit Street Partners closes fifth fund on $4.7 billion[more]

    Bailey McCann, Opalesque New York: Benefit Street Partners has closed its fifth flagship direct lending vehicle, BSP Debt Fund V, with $4.7 billion of investable capital across the strategy. Benefit Street invests primarily in privately originated, floating rate, senior secured loans. The fun

  4. 4 hedge fund themes that are working in 2024[more]

    From The Street: A poor earnings report from Tesla (TSLA) has not hurt the indexes on Thursday. The decline in Tesla stock, which is losing its position in the Magnificent Seven pantheon, is more than offset by strong earnings from IBM (IBM) and ServiceNow (NOW) . In addition, the much higher-t

  5. Opalesque Exclusive: A global macro fund eyes opportunities in bonds[more]

    Bailey McCann, Opalesque New York for New Managers: Munich-based ThirdYear Capital rebounded in 2023, following a tough year for global macro. The firm's flagship ART Global Macro strategy finished the year up 1