The Maximum Diversification® approach is a quantitative investment process based on a unique principle: maximizing diversification.
Invented and patented by TOBAM, the approach aims to collect the full risk premium of an asset class while delivering outperformance and reducing volatility.
After years of academic research, TOBAM introduced in 2006, the mathematical definition of a portfolio’s diversification: the Diversification Ratio®. The Maximum Diversification® investment process has one objective, which is to maximize the Diversification Ratio® of a portfolio given a set of constraints.
Applying this unique approach to a multi-asset framework, results in an investment process without macroeconomic views and without forecasting changes in asset prices.
The Anti-Benchmark Multi-Asset strategy is 100% bottom-up driven.
TOBAM believes in the work of Harry Markowitz who, in 1990, was awarded the Nobel Prize in Economic Sciences for his role in the foundation of Modern Portfolio Theory (MPT). The work inspires our management philosophy.
Yves Choueifaty, President & CIO of TOBAM, had the opportunity to spend two days with Dr. Harry Markowitz in June 2019. This was a great opportunity to discuss TOBAM’s approach to risk diversification with the founder of Modern Portfolio Theory (MPT).
Diversification is the most important mantra of asset allocation
The desire to diversify is at the heart of any multi-asset investment process. Diversification is typically achieved through the asset allocation but, it is a difficult task. Traditional approaches to asset allocation either follow a strategic allocation with fixed weights or tactical asset allocation with time-varying weights based on one’s market views.
It is very difficult to accurately forecast risk-return profiles of asset classes, and at the asset class level, most, if not all, the relevant information is already public and priced in. This allows investors to use principle proposed by Harry Markowitz….Diversification.
We propose a multi-asset solution that offers a dynamic allocation between asset classes without relying on market forecasts but purely based on the assessment of diversification opportunities.
Applying Maximum Diversification® approach to Multi-Asset
We have developed our multi-asset strategy to redefine the way asset allocation is done, by using the Maximum Diversification®
approach, we are able to maximize diversification from a bottom up perspective in a multi asset investment process.
In order to maximize diversification, we first need to make it measurable. To this end, we make use our patented diversification ratio® , ie, the ratio of the weighted sum of portfolio assets’ volatilities and the overall portfolio volatility, that applies not only at the single asset class level but also for a portfolio of (sub -) asset classes. The higher the ratio, the more diversified is a portfolio.
TOBAM’s multi-asset fund was launched in December 2016, using existing in-house strategies as underlying, and understood now five complementary strategies, three for equities (the US, World ex-US, Emerging) and two for fixed income (Global IG and Global HY).
|Launch Date||December 15, 2016|
|Investment horizon||5 year|
|Investment universe||MSCI ACWI + BofA ML Global Broad Market Index.|
|Share Classes||USD + EUR|
* Awards and Ratings are not indicative of TOBAM’s future performance. Morningstar ad Lipper ratings are as of January 10, 2020. Lipper ratings are calculated over 3-year.
TOBAM is an asset management company offering innovative investment capabilities designed to increase diversification. Its mission is to provide rational and professional solutions to long term investors in the context of efficient markets.
The Maximum Diversification® approach, TOBAM’s flagship investment process founded in 2006, is supported by original, patented research and a mathematical definition of diversification and provides clients with diversified core exposure, in both the equity and fixed income markets.
In line with its mission statement and commitment to diversification, TOBAM also launched a separate activity on cryptocurrencies in 2017.
As of December 31, 2019, TOBAM manages US $ 8.5 billion and its team is composed of 51 professionals.
For more information, visit www.tobam.fr or contact at email@example.com