Asset Allocation, Diversification Now Passé? Whoa! Not so Fast, Says Risk Management Expert

Share Article

A surprising notion is currently gaining traction on Wall Street: asset allocation and diversification are now passé. Just pick the asset classes you like and ride the market. But at least one risk management expert says that would be a big mistake.

"...innovative investors such as Stanford University, University of Chicago, Harvard University and Yale University benefit significantly from the inclusion of more asset classes with greater exposure across all the asset classes.”

A surprising notion is currently gaining traction on Wall Street: asset allocation and diversification are now passé. Just pick the asset classes you like and ride the market. But at least one risk management expert says that would be a big mistake.

Writing on the blog, Wealth, Strategy, & Risk, sponsored by EMA Softech, Fred Novomestky, Ph.D., makes the case that asset allocation and diversification are still fundamental to investment risk management. He makes his case, in part, by analyzing the returns posted by some of the leading university endowment funds compared to the averages for corporate and public pension funds.

The bottom line, Dr. Novomestky writes, is that in the first decade of this millennium greater diversification led to better risk-adjusted performance results.

"The real story," he says, "is that innovative investors such as Stanford University, University of Chicago, Harvard University and Yale University benefit significantly from the inclusion of more asset classes with greater exposure across all the asset classes."

Dr. Novomestky is an expert on investment strategy, investment risk management and financial economics. He has more than 30 years of experience in securities markets, quantitative/structured asset management, financial information technology, and client advisory work.

He currently is Industry Professor and former Academic Director of the Finance and Risk Engineering Program at New York University-Polytechnic Institute. He also heads Novomestky Associates LLC , a New York-based financial consulting firm serving institutional clients since 1996.

To see the complete article by Dr. Novomestky, visit Wealth, Strategy, & Risk.

About EMA Softech

EMA Softech, located in Plano, Texas, provides investment industry research and consulting services and develops investment management software. It has been assisting wealth managers and institutional investment advisors since 1987. The company offers capital markets research as well as asset allocation and risk measurement software to RIAs, plan sponsors, fiduciaries, large financial institutions and bank trust departments. EMA Softech also provides a suite of online software-as-a-service (SaaS) products and custom software programming services for the financial services industry. For more information, visit EMA Softech.

###

Share article on social media or email:

View article via:

Pdf Print

Contact Author

GREGORY GRAZE
Visit website