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Building a Diversified Portfolio for the Long-Term

A Horse Race of Diversifying Strategies

Nicolas Rabener
10 min read
28 Mar 2022

SUMMARY

  • Most diversifying strategies fail to provide diversification benefits when most needed
  • We build a diversified portfolio via trend, multi-factor, and long volatility
  • An equal-weighted approach to asset allocation is not worse than more complex approaches

INTRODUCTION

At FactorResearch, we have published more than 200 research articles on investing, which included diverse topics ranging from statistical arbitrage hedge funds to catastrophe bond investing. All research aims to provide an independent perspective based on data rather than opinions. It is a constant search for truth and knowledge.

It has also been a continuous source of disappointment, where some of the key lessons learned are the following:

  • The alpha generated by mutual funds, hedge funds, and cryptocurrency hedge funds is essentially zero

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