TY - JOUR T1 - Pension Funds Should Never Rely on Correlation JF - The Journal of Alternative Investments SP - 8 LP - 17 DO - 10.3905/jai.2022.1.157 VL - 24 IS - 4 AU - Ronald Lagnado AU - Nassim Nicholas Taleb Y1 - 2022/03/31 UR - https://pm-research.com/content/24/4/8.abstract N2 - The central decision for a pension fund is the allocation between stocks and bonds. For intellectual backup in making this decision, many rely on metrics and methods from Modern Portfolio Theory (MPT). We show how, historically, such an “optimal” portfolio is in effect the least optimal one, as it fails to protect against tail risk and under-allocates to the high-returning asset class. MPT fails in both risk control and real-world investment optimization. ER -