Samuel Lum, CFA, has a piece at Seeking Alpha recounting a presentation on a new construct for portfolio management. Whereas the traditional asset management model called for portfolio construction based on asset classes, the new paradigm focuses on sources of return, specifically market-related (beta) and skill-related (alpha). The components of each are identified, and the various investment opportunities are categorized by the attributes and the attribution of their returns. A portfolio can then be constructed based on a more intuitive risk measure. (The article mentions Maximum Drawdown, but I can see Value at Risk taken into consideration.)
Institutions are adopting this new model, or at least its language. Allocations to alternatives are increasing, and are becoming more mainstream. On the other hand, beta exposure is being seen as a commodity, and a greater portion of the institutional portfolio is being indexed.
As the author indicates, the new model is complex; this is a bare summary of the elementary tenets. A more thorough discussion can likely be found in some of the CAIA curriculum. There are also alternative investment seminars being given all the time at various locations across the country.
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