Rain Capital Management: An Advance in Portfolio Construction
Larry Cao, of the CFA Institute, writes that risk factor diversification – like that used at Rain Capital – is one of the most important advances in portfolio construction techniques in recent decades and is increasingly used by sophisticated institutional investors. According to Cao, asset classes are simply too correlated with each other for traditional asset allocation to add much to portfolio diversification anymore. Continue reading to see why he thinks risk factor allocation is the most effective approach to diversification: