AQR: Plain Old Diversification Still Investors’ Best Bet Strategies like selling equities when valuations are high or buying put options have not historically worked out as well as simply holding uncorrelated assets, the quantitative investment firm found. Amy Whyte September 28, 2018 The alternative investment firm co-founded by Cliff Asness said strategies such as selling equities when valuations are high or buying put options to hedge against equity risk have historically fared poorly compared with diversification. The paper compared a range of asset classes and diversified portfolios, from a simple 60/40 mix of stocks and bonds to multi-asset strategies like risk parity. It also examined the hypothetical performance of defensive investments such as put options. Puts — contracts investors buy to lock in the sell price of securities that they believe will decline in value — on average lost money between 1986 and 2017, according to the paper. In fact, AQR’s hypothetical portfolio of put options was the only strategy featured in the study to deliver a negative average return, falling 4.2 percent annually during the 31-year period. Even during equity market drawdowns, puts were outperformed by every other defensive strategy analyzed in the study except for gold, which performed slightly worse on average. https://www.institutionalinvestor.c... Old Diversification Still Investors Best Bet