Building an Efficient Portfolio

Currently, an investor or investment manager handling an “efficient portfolio” should already be completely globalized, they should be what is known as a “citizen of the world”, and feel equally at ease investing in assets in any of the markets available. Currently, a good money manager should be part of a financial thought or formation, a thorough knowledge of geopolitical, financial and social situation in worldwide areas; be familiar with continual technological and cultural changes which dominate our society (nowadays people who don’t use computers are considered illiterate); it is someone able to move large amounts of money amongst the different markets in a matter of minutes; and who knows how to keep and manage international assets. All of this, of course, within a context of increasingly more transparent markets and therefore efficient.  

In more developed countries than ours, where there are many more considerable fortunes, large investors are turning to this kind of asset in order to protect themselves in front of uncertain times, acquiring art, mostly modern and contemporary art (pop, minimalism and abstract expressionism). However, in an article published by the Wall Street Journal in June, 2003, Mary Hoeveler, head of the art advising service at Citigroup Private Banking warns that “[…] understanding the art market requires effort, knowledge, long term strategy and be well advised, not to mention a good eye […] The art market can be very voluble and there are unpredictable factors, such as trends and taste, which are completely subjective.”

 In the case of Japan, after having a spectacular uptrend during the seventies and eighties, real estate has not had a good performance since the Asian crisis either, when economy entered a profound recession it still hasn’t emerged from; although it is fair mentioning that Japan’s perspectives, as well as the entire Asian Southeast, are now better due to the strong influence the Chinese economy is having in that area.

Portfolio diversification allows us to defend ourselves not only of on type of asset falls at a given time, but it helps to protect our investments from political uncertainty, economy vagaries, terrorism problems, war and other situations that could develop and are difficult to quantify. With the constant changes produced from globalization and the ease of fund mobilization, international diversification is even more accessible to investors.