BusinessWeek – With the economic recovery recently turning bumpy, investors have grown wary of downside risk in their investment portfolios and are increasingly willing to give up some returns in exchange for protection from those risks. Volatility spiked in May, as concerns about European sovereign debt and a bigger-than-anticipated slowdown in China’s economy shook the market’s confidence.
More than nine months into an economic recovery, you would expect investors to be reaching for high returns, but that’s not the case, says Jeff Cusack, president of Forward Funds, who’s seeing much greater interest in risk control. The traditional approach to modern portfolio theory, which focuses on diversified asset allocation and portfolio manager selection, is being challenged as never before, he says.
