The benefits of diversification

TOBAM’s unique and patented Anti-Benchmark® approach, which has garnered industry accolades and over $8 billion in AUM globally, provides investors with an innovative way to target the risk premium of an investment universe while seeking to reduce volatility and avoid the concentration pitfalls of market-cap weighted indices.

A message from TOBAM’s founder

Who is TOBAM

What is the Diversification Ratio®

Which portfolio is more diversified?

Portfolio 1

Q1 L pre

Q1 L post

Portfolio 2

Q1 R pre

Q1 R post

Portfolio 1 is comprised entirely of financial stocks, limiting the portfolio’s risk exposure to approximately one effective source of risk. In contrast, Portfolio 2 offers exposure to 10 different sectors providing increased diversification across multiple sources of risk.

It’s not how much you hold,
it’s what you hold.

Which portfolio is more exposed to Energy Stocks?

Portfolio 1

Q2 L pre

Q2 L post

Portfolio 2

Q2 R pre

Q2 R post

Portfolio 1 maintains a relatively higher direct weighting to the Energy sector, however, all remaining portfolio holdings are negatively correlated to Energy stocks. The result is ~10% exposure to the risk of Energy stocks. In contrast, Portfolio 2 maintains both a direct weighting to the Energy sector as well as a substantial percentage of the remaining portfolio (20%) in stocks positively correlated to Energy. The result is ~25% exposure to the risk of Energy stocks.

Diversification is not limited only to the weight of a country, sector, or security but requires an understanding of how assets within a portfolio interact with each other.

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