The limits of diversification in portfolio management

Although diversification has long been seen as a must for any investment strategy, the recent financial crisis, which saw correlations spike across all risk asset classes, showed there are limits to its value. In the post-crisis landscape, specialisation may be a more appropriate strategy.

“The wise man puts all his eggs in one basket and watches the basket”
A. Carnegie

The US economist Harry Markowitz’s paper “Portfolio Selection” in 1952 set the stage for decades of advice to diversify. The

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