Volatility is the academic’s choice for defining and measuring risk; but Oaktree Capital’s Howard Marks warns Bloomberg TV’s Stephanie Ruhle that “while volatility is quantifiable and machinable… it falls far short as ‘the’ definition of investment risk.” In fact, he berates, “I don’t think most investors fear volatility. In fact, I’ve never heard anyone say, ‘The prospective return isn’t high enough to warrant bearing all that volatility.’ What they fear is the possibility of permanent loss.” With $91 billion under management, perhaps it’s worth listening to (and reading) his perspective: “In brief, if riskier investments could be counted on to produce higher returns, they wouldn’t be riskier. Misplaced reliance on the benefits of risk bearing has led investors to some very unpleasant surprises.”
This post was published at Zero Hedge on 09/05/2014.
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