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Back to News Diversification versus Concentration
April News
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Diversification versus Concentration April News We have been emphasising the importance of diversification continually since the 2008 Credit Crunch Crash. However, it is possible that one can over diversify, which will dilute the return. We still advise that investors should be diversified as far as possible into at least four of the main asset classes namely, equities, alternative assets, property and offshore funds - ideally 25% in each asset class. Each of these asset classes have many sub-asset classes into which clients’ investments should also be diversified, but it is here we believe one can be over diversified. For example, in the case of equities, to have your assets, evenly diversified amongst the 48 sub asset classes on the JSE, will undoubtedly lower your risk profile dramatically, but your return will also be lowered dramatically. The attached Newsletter (here below) of one of the best Hedge Funds that Kanaan Fund of Hedge Funds has invested in, namely Tower Fund Capital Management, explains the negative effect of over-diversification graphically. You will notice that they have a leg to stand on with reference to their performance, as shown in the first paragraph of their newsletter. Friendly greetings, Andre Delport
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