@article {Bhansali101, author = {Vineer Bhansali and Jeremie Holdom}, title = {Diversifying Diversification: Downside Risk Management with Portfolios of Insurance Securities}, volume = {47}, number = {6}, pages = {101--113}, year = {2021}, doi = {10.3905/jpm.2021.1.229}, publisher = {Institutional Investor Journals Umbrella}, abstract = {Investors are always in search of diversifying securities and strategies to assist in downside risk management. The authors consider six popular diversifying securities: gold, Swiss franc, Japanese yen, bond futures, S\&P 500 80\% strike put options, and trend-following strategies. Using 50 years of data, the authors demonstrate that a portfolio approach to diversification strategies results in more robust outcomes when combined with a portfolio that has large equity exposure. Although each of the individual securities can be more or less beneficial in specific periods and environments, the authors conclude that a simple portfolio approach to diversification, whether optimized or not, allows investors to robustly manage risk while not being overly concentrated.TOPICS: Portfolio construction, risk management, security analysis and valuation, currency, optionsKey Findings▪ Many securities and strategies, such as gold, yen, Swiss franc, bond futures, S\&P 500 Index put options, and trend following, have all been used for downside risk mitigation.▪ Over 50 years of history, each of these strategies assists in mitigating risk and improving the performance of a portfolio with S\&P 500 exposure.▪ However, by diversifying diversification (i.e., by combining these strategies), we demonstrate that more robust portfolio outcomes can be realized without the possibility of hindsight bias or over-reliance on one risk mitigation strategy.}, issn = {0095-4918}, URL = {https://jpm.pm-research.com/content/47/6/101}, eprint = {https://jpm.pm-research.com/content/47/6/101.full.pdf}, journal = {The Journal of Portfolio Management} }