Diversification is over-played. Where an asset’s prospective return is symmetric, too much diversification means the investor is creating a risk-free portfolio and will not achieve returns that deviate from the market rate of return. If an investor has an idea - back it. Do not diversify it away. That does not mean only having one investment view. The investor needs to create a portfolio that is consistent with their own risk tolerance, but at the same time ensure that if the investment view comes to fruition, there is an out-turn that is sufficiently different from the market rate of return.

Where an asset’s return is asymmetric, the investor should either significantly reduce the amount of risk dedicated to that investment view, or diversify the asymmetric asset to such an extent that a symmetric asset is created. This is particularly the case in credit. Investing in credit involves asymmetry that an investor is only paid to adopt in a diversified portfolio.