There is a difference between fashion and style. Even in the investing world, trends come and go. There seems to be a new fashionable strategy with every market cycle. However, core themes such as risk management are always in style, no matter how markets are positioned.
Before my career in finance, I worked in the fashion and design industries. I saw firsthand how fleeting trends can be, as well as how those late to a trend sometimes lost out. Upon entering the financial world, it quickly became apparent that the same ephemeral nature can apply to both clothing and capital.
“Fashion fades; style is eternal.” — Yves Saint Laurent
Similar to Saint Laurent’s thinking, a well-rounded advisor could argue that alpha fades, but risk management is forever. The efficient market hypothesis states that everything is priced fairly and it is impossible to generate consistent alpha. However, the biggest investment players today, and your clients, may still be searching for new ways to beat the market and often are willing to take on more risk to do so.