RT Journal Article
SR Electronic
T1 An Optimal Frontier
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 29
OP 40
DO 10.3905/jpm.2000.319762
VO 26
IS 4
A1 Felix Schirripa
A1 Nan D. Tecotzky
YR 2000
UL https://pm-research.com/content/26/4/29.abstract
AB The optimal frontier investment method described here represents a new portfolio construction process that relies on well–established practices and theory. It incorporates the insurance concept of risk–pooling into the Markowitz portfolio optimization process. This method offers investors returns higher than had previously been thought possible, with no increase in risk. In essence, this method pools a group of investors returns with different risk–reward goals in a single efficient portfolio that preserves the group's average risk tolerance. The portfolio's overall return is then distributed to the investors on the basis of their preselected risk levels. Pooling each investor's risk and return goals in one combined portfolio results in higher returns for everyone, proving that in portfolio management, the whole does exceed the sum of its parts.