Why smart investors use portfolio diversification

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The history of the financial world can be divided into two time periods, before and after 1952. That was the year in which a young student at the University of Chicago, published a paper outlining a groundbreaking theory called portfolio selection. Harry Markowitz was the first to prove that a broadly diversified mix of assets from different classes can significantly reduce the risk of a portfolio whilst at the same time increase its return. With this theory Markowitz revolutionised the financial world in a way that few others have succeeded either before or since. The discoveries of Prof Harry Markowitz are central to the superfund investment strategy as the age old saying goes “don’t put all your eggs in one basket”. That's why the superfund strategy diversifies investments across over 100 different markets. In 1990 Prof Markowitz received the Nobel Peace Prize in Economics in recognition of the modern portfolio theory that he developed, and also for his pioneering life's work. Successful fund managers and institutional investors around the world use Markowitz’s discoveries about portfolio diversification to achieve higher returns, with substantially less risk. Markowitz’s message to investors remains the same today, more than ever.

Prof Markowitz speaking: If you are diversified, your portfolio will not go down even if you have a big crash. Everybody who doesn't have their safety, their financial safety belt on will go through the window. If they work they work, if they don't work, they don't work. The only problem is that if everybody has the same computer model and it all says buy at the same time. Fortunately, Superfund tries to be uncorrelated with the rest of the world. But if it, if everybody says buy and at the same time and everybody says sell that will destabilise the market. And the market will go running up and the market will come running down, like it sometimes does. I do not do commercials, I call it as I see it. But nothing prevents me from using Superfund’s objectives and numbers which I have seen, to illustrate the numerical point. Superfund’s seeks zero correlation, and achieves very close to zero correlation by going long and short without leveraging. Historically Superfund’s has gotten more De Libor (?), past performance is not necessarily an indication of what you do in the future so you've got to listen to their story and make up your own mind.