A question we often get asked, as we discuss building convexity into investment portfolios with large Pension Funds/SWFs/Insurance Companies/Endowments/Banks, is something along the lines of “How much can we realistically do? Can we do enough to make a difference?”. The honest answer is plenty enough to make a major difference! In last month’s update https://convex-strategies.com/2021/04/16/risk-update-march-2021/ figures 10-17 showed the nearly identical concavity of a range of familiar investment strategies. We observe, regularly, how the near universal incentive around short-term arithmetic returns, conveniently paired with flawed risk methodologies, leads unsurprisingly to fiduciaries in all forms targeting the mean of short-term probabilistic … Continue reading Risk Update: April 2021 – Shannon’s Entropy.