Risk Allocation: A New Investment Paradigm?

Journal of Portfolio Management, Winter 2014, Volume 40, Issue 2, pp1-4

Risk allocation has gained popularity among sophisticated investors, perhaps evidenced by the increasing number of papers, too numerous to cite, recently published on the subject in the practitioner’s literature, including The Journal of Portfolio Management. What the concept of risk allocation exactly means, however, deserves some clarification. Various interpretations exist for what is sometimes presented as a new investment paradigm and other times presented as a simple reinterpretation of standard portfolio construction techniques.