Approach
A Brief Description of Modern Portfolio Theory:
Above is a depiction of the "efficient frontier." A challenge for any money manager is to create a so called "efficient" or "optimal" portfolio, one whose risk/return charateristics reside on the efficient frontier. In doing so, a money manager is creating a portfolio that offers the greatest return given an identified level of risk tolerance.
Out of the thousands of asset classes available in which to invest, a significant question becomes, “in which asset classes should I invest in order to create an efficient portfolio?” As seen in the following table, choosing the best performing asset class during a given year is challenging.
