Efficient frontier theory is panned

Using the efficient frontier theory to determine which asset classes will outperform is 'foolish', according to Merrill Lynch. Speaking at a recent conference in Frankfurt, Ewen Cameron Watt, head of investment strategy and research at the group, said the theory may be correct but it tends to highlight asset classes that have already performed well, rather than those that will perform well in the future. He said: 'The theory goes, if you have 100% in one asset class and 0% in another, you would have a 1.5% return for 11% risk. But if you put the other asset class in varying mixes, say...