Does diversification still work? Market concentration raises challenges
Due to the surge in AI as a theme in public equities, fixed income and real assets, exposure risk is rising
IT IS often said that diversification is the only free lunch in investing. That is because by spreading your funds across asset classes, you benefit from lower risk without sacrificing returns.
Is that still true? Thanks to the surge in artificial intelligence as a theme – across public equities, fixed income and even real assets – concentration risk is rising and threatens to make diversification less effective.
If you have done nothing in the past few months, the strong performance of the AI and tech theme has likely skewed your strategic asset allocation towards equities, and technology in particular.