Multi-Asset Solutions that Go Beyond the Efficient Frontier
Authors and Contributors
The relationship between expected returns and risk has eroded considerably over the past 25 years. Previously, investors could take on a moderate amount of risk and reasonably expect sufficient long-term returns to meet their goals. After a decade of advancing markets, high valuations across most asset classes mean future return expectations have fallen dramatically.
Now, investors face a troubling dilemma: assume much greater levels of risk to achieve the same return or reduce risk at the expense of return. Fortunately, this analysis is not the last word. We believe investors can achieve their return objectives without taking on more risk; the key is to revisit the basics of Modern Portfolio Theory (MPT) and make the most of diversification.