Overall, we’re cautiously optimistic about the recovery domestically, with an eye toward the various external macro forces that could disrupt it. As you know, we believe true diversification is a proactive process that requires looking under the surface of stated asset class objectives to identify underlying performance drivers and risks that could pervade multiple asset classes. It also happens to be a decent way to identify opportunity. 2011 got a number of issues out on the table that were useful in developing positioning around interest rates, credit, growth, volatility, currencies and liquidity. These are the core drivers of the economy and capital markets as they seek equilibrium; not surprisingly, they’re also the core drivers of diversification in client portfolios.
This is an excerpt from our article “Natural Selection” published March 13, 2012