RT Journal Article SR Electronic T1 The Death of Diversification Has Been Greatly
Exaggerated JF The Journal of Portfolio Management FD Institutional Investor Journals SP 15 OP 27 DO 10.3905/jpm.2012.38.3.015 VO 38 IS 3 A1 Antti Ilmanen A1 Jared Kizer YR 2012 UL https://pm-research.com/content/38/3/15.abstract AB Diversification is famously referred to as the only “free lunch” in investing, but it has been under assault since the 2007–2009 global financial crisis, when virtually all longonly asset classes moved down together. Ilmanen and Kizer argue that the attacks are undeserved. Most investors were never as diversified as they thought they were, and there is ample room for improvement by shifting the focus from asset class diversification to factor diversification. They show that diversification into and across factors has been much more effective in reducing portfolio volatility and market directionality than asset class diversification. The benefits are greatest for long–short investing, which requires shorting and leverage but are also meaningful in a long-only context.TOPICS: Portfolio theory, analysis of individual factors/risk premia, financial crises and financial market history