Asset Rotation: The Demise of Modern Portfolio Theory and the Birth of an Investment Renaissance - Matthew Erickson (Investments, financial markets, portfolio management)

“The virtues of Modern Portfolio Theory are taught at every business school across the country. . .The reality is that the investment world as we know it is changing. Even what has worked in the past may not continue to work in the future.”—From the Preface

The paradigm has shifted and we now find ourselves standing on the precipice of an Investment Renaissance. Adhering to a conventional “Modern Portfolio Theory”-based approach to asset management was once regarded as a safe and stable risk-adjusted strategy; however, this widely adopted practice may soon become our greatest impediment to achieving long-term success. Asset Rotation presents a time-tested approach to investing that leads one to question the virtues of Modern Portfolio Theory. Unlike more traditionally accepted methods, asset rotation has proven to be successful throughout the history of capital markets, in good times and bad. Written by Matthew P. Erickson, CEO and Chief Investment Officer of Renaissance Capital Management, this important resource outlines a timely approach to portfolio management in which limiting losses is paramount—focused on the principles of asset rotation, and not asset allocation.

As Erickson explains, more than a decade ago taking an asset rotation based approach would have been nearly impossible. But with the proliferation of the Exchange Traded Fund (ETF) in recent years, what was previously impossible is now possible for any investor. ETFs give investors the opportunity to tactically navigate the investment landscape, with the ability to dramatically alter the construct of their portfolio with only a handful of trades. This evolutionary investment vehicle enables one to implement tactical shifts in their portfolios in an effort to avoid prolonged declines. Asset Rotation offers investors at all levels of expertise a method for executing these strategies in order to maximize long-term returns.

Step by step, Asset Rotation details a tactical, price-momentum-based strategy and reveals the keys for how to participate in rising markets, but more importantly, maintain a discipline to reduce participation in prolonged declines. Over time, this revolutionary approach has proven to yield superior returns with significantly reduced levels of risk. Asset rotation, not asset allocation, provides the engine for true, long-term sustainable growth.

Enjoy and seed!