Risk.net

Research shows only 10-15 hedge funds needed for optimum portfolio diversification

Hedge fund investors are returning to the concept of modern portfolio theory: diversification by combining several hedge funds with different return distributions and risk profiles to diversify risk.

several-people

Harry Markowitz’s 1952 seminal paper on modern portfolio theory contains the foundation of what seems to be the only free lunch in finance: the reduction of risk through portfolio diversification. An investor who spreads wealth among many imperfectly correlated assets will observe a decrease in the volatility of their portfolio, says Markowitz. When properly executed, there is no reduction in average return and so, apparently, no bill for the lunch.

Since Markowitz the idea of portfolio

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options

Most read articles loading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here