ABCP: Always Buy Concentrated Portfolios

IIROC has released a 113 page report on ABCP. For those who have no time to read the entire thing, here’s the official PrefBlog summary: Don’t sell stuff that goes down, OK guys? Only sell stuff that goes up.

The focus of the report is on “suitability”; the words “concentration” and “diversification” each appear exactly once, in the sections describing the paper itself, not the client’s portfolio. Given that the Capital Asset Pricing Model, with its emphasis on risk reduction via diversification, is only about 40 years old, it is hardly surprising that the concept is foreign to the regulators.

One Response to “ABCP: Always Buy Concentrated Portfolios”

  1. […] Portfolio Concentration, particularly with respect to retail clients putting an enormous chunk of their portfolios into a single name […]

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