PT  - JOURNAL ARTICLE
AU  - Wai Lee
ED  - Scott, Cathy
TI  - Practical Applications of Risk-Based Asset Allocation: A New Answer to an Old Question?
AID  - 10.3905/pa.2013.1.2.015
DP  - 2013 Oct 31
TA  - Practical Applications
PG  - 1--3
VI  - 1
IP  - 2
4099  - https://pm-research.com/content/1/2/1.15.short
4100  - https://pm-research.com/content/1/2/1.15.full
AB  - Risk-Based Asset Allocation: A New Answer to an Old Question? Wai Lee Risk is overtaking expected returns in portfolio construction for many investment managers. Wai Lee, Managing Director at Neuberger Berman , advises investors to clearly state their goals and question whether the intended portfolio meets them. Lee urges investors to de-emphasize numerical simulations and portfolio fine tuning. This Practical Applications report is about his award-winning article Risk-Based Asset Allocation: A New Answer to an Old Question? , which might have drawn a frosty reception from some of his peers because it is highly critical of increasingly popular risk-based strategies. Lee examines four risk-based asset allocation portfolios: equally weighted, global minimum variance, most-diversified portfolio and equal risk-contribution portfolio, also dubbed risk parity. The one common characteristic these strategies share is that the only input required to determine portfolio composition is a model of risk, he tells us. Noticeably absent is an explicit model of expected returns, Lee cautions.