Oct 6, 2026 · 45 min · 12 segments
Could your portfolio be over-diversified and under-diversified at the very same time? Liquid alternatives, operational due diligence, and emerging managers: Dr. Ranjan Bhaduri, PhD, of Bodhi Research…
I mentioned how you can help with manager diligence, and you were quick to point out that's one of the strengths of Bodhi.
You've been a gentle critic of how asset owners construct absolute return portfolios.
So now we're going into another area that I think is part of your bread and butter is portfolio construction.
Why have you been a critic of how they construct absolute return portfolios? What are asset owners missing and how could they improve portfolio construction? And I know you're going to tell me about how the Canadians have solved this problem.
We're world-class in ice hockey and we're world-class in pensions, right? And let me add lacrosse.
One is there's a lot of allocators who are over diversified and under diversified at the same time.
And over diversified in that they have too many managers in their portfolio and under diversified in that these managers are actually many of them have the same risk or return drivers, especially in a flight to quality.
So they're actually not as diversified as they need to be in an absolute return portfolio.
The portfolio construction and the amount of energy and effort that is put into the top-down, into the portfolio construction, it's sort of asymmetric.
But the decisions as to which, putting it all together, is that that energy is a lot less.
And my colleague, Gunther Meissner, wrote a whole book on correlation risk modeling.
And correlation's a statistic that one can easily make mistakes and so forth.
So there's a lot of nuances in constructing a portfolio and just crafting it in that right way.
I mentioned how you can help with manager diligence, and you were quick to point out that's one of the strengths of Bodhi.
You've been a gentle critic of how asset owners construct absolute return portfolios.
So now we're going into another area that I think is part of your bread and butter is portfolio construction.
Why have you been a critic of how they construct absolute return portfolios? What are asset owners missing and how could they improve portfolio construction? And I know you're going to tell me about how the Canadians have solved this problem.
We're world-class in ice hockey and we're world-class in pensions, right? And let me add lacrosse.
One is there's a lot of allocators who are over diversified and under diversified at the same time.
And over diversified in that they have too many managers in their portfolio and under diversified in that these managers are actually many of them have the same risk or return drivers, especially in a flight to quality.
So they're actually not as diversified as they need to be in an absolute return portfolio.
The portfolio construction and the amount of energy and effort that is put into the top-down, into the portfolio construction, it's sort of asymmetric.
But the decisions as to which, putting it all together, is that that energy is a lot less.
And my colleague, Gunther Meissner, wrote a whole book on correlation risk modeling.
And correlation's a statistic that one can easily make mistakes and so forth.
So there's a lot of nuances in constructing a portfolio and just crafting it in that right way.
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