The best financial managers have long been the ones who were able to handle a variety of portfolios, including traditional equity and debt instruments, hedge funds and mutual funds.
In a recent research paper, McKinsey found that the best managers were those who have access to a broad range of capital, including money market funds, bond funds and index funds.
The authors of the report also found that they have more options for their portfolio managers than others.
One reason for the difference is that they are also more likely to have a portfolio that includes more riskier assets than a typical firm.
In general, managers who have more diversified portfolios tend to be less risk-averse, the researchers said.
But for financial managers, it may be more difficult to find that balance between diversification and risk management.
That’s because the managers in McKinsey’s study had a wide range of portfolios and different types of assets to choose from.
For instance, the managers who are more risk-taking in their portfolio might have a mix of low- and high-yield bonds, while those who are less risk averse might have high- and low-yielding bonds.
And they may also have assets with varying maturity dates, or with different risk-return profiles, the report said.
These types of portfolios can have different investment objectives, said David E. Zweig, a financial analyst at Citi Group in New York.
“When we look at it, a lot of times the managers that are risk-adjusted, those are the ones that will have a lot more options in their portfolios,” he said.
Another thing that could limit the amount of risk a manager has is the amount they can hold in cash, said Michael C. Shulman, a professor of finance at the University of Southern California.
That might make it difficult for a manager to manage a portfolio of debt and equity, he said, since the manager might need to keep a smaller amount of cash in the account, or perhaps not even have enough in it at all.
A portfolio of bonds and equity that’s less risk tolerant may be easier to manage than a portfolio with less risk, but it may also be more expensive to manage.
The same applies to bond funds, which are generally more expensive than bond funds.
Shurman also noted that there are a lot fewer firms out there who have all the tools to manage portfolios.
That means that if a manager needs to be able to diversify in an investment environment, they may be out of luck, he added.
In addition to diversification, managers also have to consider risk, and the types of risk they can handle.
A recent study by the National Bureau of Economic Research found that managers with the best financial portfolios had lower levels of financial literacy, and higher levels of risk tolerance.
But managers with poor financial literacy and risk tolerance also had lower investment returns, and more difficulty meeting their targets, the study found.