Delegated portfolio management and diversification

Abstract

This article analyses the potential diversification benefits available to high-net-worth investors utilizing multiple portfolio managers. We show that enlisting seven actively managed portfolios from multiple portfolio managers generate significant benefits in terms of risk reduction, and, interestingly, diversification benefits are shown to be larger for low-risk portfolios compared to high-risk portfolios.

Keywords:

• Delegated portfolio management
• portfolio management
• risk diversification

JEL Classification:

• G11

Acknowledgement

We are grateful to Hemonto A/S for providing data.