Tracking error is for trackers
The risk of risk management
Tracking error is for trackers
Warren Buffet warns investors not to put all of their eggs in the same basket. Harry Markowitz cites diversification is the only free lunch in investing.
The notion of risk management has become ubiquitous. University degrees, financial regulations, and computer models have intertwined themselves across every asset class in every faucet of risk. In the midst of all this intense focus, tracking error has become one of the most prevalent measures of risk in active management. We see danger in such a myopic focus.
The risk of risk management
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