Eggs and Baskets

Thursday, June 3, 2021

Written by Alex Beveridge

In the “before times” one of the best bits of my job was traveling around Europe meeting with different asset owners - interviewing them on topics for Institutional Investor’s private in person meetings (My beat is all the beautiful and interesting cities of Europe).

I definitely miss the travel. However, my new digital normal means I probably speak to more asset owners, more frequently, than at any other time in my career.

This week one of the dominant themes was around diversification. Everyone knows you should not put all your eggs in one basket.

But, that adage doesn’t address the crucial questions of how many eggs and how many baskets.

Establishing and maintaining the right level of diversification is an uncertain process. Too little diversification exposes a portfolio to substantial risk.

But too much dilutes the impact of good security selection and tamps down performance.

Meanwhile, unrecognised correlations between assets may undermine diversification efforts. And the growth achieved by the best performing investments may require painful rebalancing in order to maintain adequate diversification.

What’s the right way – and the wrong way -- to achieve optimal diversification?

This critical investment issue is one of many that will be explored in depth at Institutional Investor’s European Pensions & Investment Roundtable to be held in person, in Copenhagen on 29 September – 1 October 2021.

Interested in attending? Register your interest here.

See a full list of our live events happening in September here.

Author: Alex Beveridge

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