Many financial analyses focus solely on where the pounds are invested, not from where the risk emanates, writes Julia Rees. But by deploying this lesser-used risk lens, advisers can make more informed decisions across strategic asset allocation, tactical asset allocation, and client risk
How many portfolio allocation pie charts have you seen in your career? How about risk allocation pie charts? Far fewer! Take the UK growth portfolio on the upper left of the diagram below. Implemented with funds or ETFs, this portfolio would encompass thousands of securities, hundreds of issuers, and multiple geographies. The adviser might feel like they have done a good job diversifying the portfolio. However, the risk allocation reveals that 99% of the portfolio's risk comes from core equities alone, a fact that is obscured by the capital allocation. This portfolio risk concentrati...
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