Are there any investment “truths” that have not been shattered during the past 18 months? Diversification that was meant to smooth returns in difficult markets failed to deliver, even for wealthy investors with highly complex, multi-asset class portfolios. Many hedge funds did not provide a hedge. Even supposedly “safe” investments such as US municipal bonds have taken investors for a wild ride.

The depth and breadth of this market crisis have called into question the very foundations of modern portfolio theory just when they were needed the most.