The purpose of diversification is to control losses from any one asset class and reduce volatility by allocating across a range of investments. Undiversified portfolios can perform extremely poorly or extremely well; when they perform well, investors may not realize how much risk they took. Thus, Aon believes that the need to diversify portfolios—although it has always been strong—is increasingly critical in today’s market environment.
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- S&P 500® Index. A capitalization-weighted index representing stocks chosen by Standard & Poor’s, Inc. for their size, liquidity, stability, and industry group representation. The companies in the S&P 500 Index are generally among the largest in their industries.
- Barclays Capital Aggregate Bond Index. This index is the broadest representation of the investment-grade U.S. bond market. It includes allocations to U.S. government bonds, investment grade corporate bonds, and mortgage- and asset-backed securities.
- Cboe Volatility Index® (VIX® Index®). The VIX Index is an up-to-the-minute market estimate of expected volatility that is calculated by using the midpoints of real-time S&P 500® Index (SPX) option bid/ask quotes. More specifically, the VIX Index is intended to provide an instantaneous measure of how much the market “thinks” the S&P 500 Index will fluctuate in the 30 days following each tick of the VIX Index.
- MSCI All Country World Index. A capitalization-weighted index of stocks representing 46 stock markets in Europe, Australia, the Far East, the Middle East, Latin America, and North America.
- HFRI Macro Systematic: Diversified Index. Systematic: Diversified strategy investment processes typically are functions of mathematical, algorithmic, and technical models, with little or no influence of individuals over the portfolio positioning. They include strategies that employ an investment process designed to identify opportunities in markets exhibiting trending or momentum characteristics across individual instruments or asset classes. These strategies typically employ quantitative processes that focus on statistically robust or technical patterns in the return series of the asset, typically focus on highly liquid instruments, and maintain shorter holding periods than either discretionary or mean reverting strategies. Although some strategies seek to employ counter-trend models, they benefit most from an environment characterized by persistent, discernible trending behavior. Systematic: Diversified strategies typically expect to have no greater than 35% of the portfolio in either dedicated currency or commodity exposures over a given market cycle.
- NCREIF ODCE Index. A capitalization-weighted index of investment-grade income-producing properties.
- Burgiss Global Private Equity Index. A collection of private capital data.
- CDLI Private Debt Index. An index that seeks to measure the unlevered, gross of fee performance of U.S. middle market corporate loans, as represented by the asset-weighted performance of the underlying assets of business development companies (BDCs), including both exchange-traded and unlisted BDCs, subject to certain eligibility requirements. The CDLI Total Return Index includes three components: income return, realized gain/loss, and unrealized gain/loss.
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