Fishknife - Diversity? Don’t believe it

Thursday, October 03, 2013

If you want to invest in credit, you need a diversified portfolio. But there is no such thing

Comment by: Anonymous. Posted 10 years ago [2013-10-16 22:46:14]

Hard to disagree with The Knife that diversity is an illusion but would disagree that a 300 name portfolio is a good idea. You are guaranteed to have dogs in your portfolio if you take this approach. Granularity is a necessary evil for asset gatherers like mutual funds but for more credit savvy investors they understand the merits of more concentrated portfolios where credit selection is the key. Would be interesting to see some data to back this up. For example the better mid-market managers, often via a BDC structure, seem to have generated good returns taking more concentrated credit bets than say CLOs which are to a degree forced diversification, and mutual funds that buy everything that is liquid

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