Globalization of investment markets combined with technology advances have contributed to higher correlation of investment returns by various asset classes.
Large conglomerate mutual fund complexes have emerged reducing manager and fund diversification, with the 50 largest fund companies now controlling 92% of the assets according to Morningstar.
Investment structure and style preferences have changed, as passive, low-cost index funds and ETFs dominate investment portfolios to deliver low cost beta. The disappointing relative performance and higher fee levels by many active management funds over the last 10 years has accelerated this shift in investor preference.
The investor portfolio construction process has become more generic. The media’s attention on the returns of certain benchmarks to retail investors has put pressure on the portfolio allocator to be beholden to these benchmarks in the portfolio construction process. The business/career risk to the allocator of straying from the typical asset allocation mix has contributed to this generic portfolio construction process.