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Varied asset classes offer a faux diversity.
- Article from:
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Investment Adviser
- Article date:
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October 22, 2007
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Copyright informationCOPYRIGHT 2007 FT Business. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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Byline: Cormorant Capital says IFAs wrongly assume adding asset classes creates diversity
Financial advisers are achieving false portfolio diversification by adding more classes to the mix, according to independent asset allocation specialist Cormorant Capital.
Steve Williams, managing director of Cormorant, said certain market cycles could result in almost every asset class performing similarly.
"People assume that you add another asset class and, because it has low correlation with other holdings historically, it is providing diversification," he said.
He warned of the danger of relying entirely on past performance data to work out future risk, returns and ...