Background: Investing internationally is easier than ever before, with the rise of the internet, unification of accounting standards, and faster flow of information. Yet, many argue that due to increasing global equity market correlations, it is getting increasingly hard to attain benefits from international diversification. Therefore, it is important to know if there are any benefits attainable from international diversification for Swedish investors. Purpose: The purpose of this thesis is to investigate if there are any benefits achievable from international diversification for Swedish investors, if those benefits have changed from before and after the financial crisis in 2007/2008, as well as where Swedish investors might attain the greatest benefits from diversification; namely in developed- or emerging markets. Method: Correlations are measured over the time periods before and after the financial crisis, using both a 61-month correlation window (the entire periods) as well as a 12-month rolling correlation window.  To test diversification benefits, different portfolios are created using the Markowitz Portfolio Optimizer, such as a Maximum Sharpe portfolio and an Equal Weighted portfolio. Conclusion: Correlations have increased from before and after the financial crisis, both for developed- and emerging markets. Diversification benefits exist for Swedish investors, but they have decreased from before and after the financial crisis, and they appear slightly greater in emerging markets than in developed markets.

Studies carried out during the 2000’s have shown that securitized real estate has outperformed the direct real estate market with as much as up to 500 basis points on an annual basis during the 80’s and 90’s. Allocation to real estate among institutional investors has at the same time been at around 5%. Research conducted in the area during this period has suggested an allocation to real estate around 10% - 20% in a mixed-asset portfolio, depending on the specifics of the real estate. Securitized and direct real estate come with different benefits and different problems, such as a better inflation hedge and asset-liability frameworks but worse information transparency for direct real estate, but a higher liquidity, return (including volatility) and information transparency for securitized real estate market. This research shows that during the period 2000-2010 securitized real estate still outperforms direct real estate. The spread during the period is as much as 762 basis points per annum. The highest risk-adjusted return is given to the investor who invests between 21% - 30% depending on the specifics of the real estate. However, noticeable is that risk factors such as illiquidity, lower transparency and geographical could eventually give another perspective on the outcome of the risk-adjusted return.

Thesis (MBA (Business Management))--Stellenbosch University, 2008. / ENGLISH ABSTRACT: Private Equity is rapidly growing as an alternative asset class for investors in South Africa. Local and international literature presents overwhelming evidence to suggest that Private Equity offers superior risk-adjusted returns and portfolio diversification benefits. Private Equity managers charge quite substantial fees and investors might be concerned about the sustainability of the returns achieved by these firms. This research report addresses the question of how exactly Private Equity managers are able to achieve their superior returns. Although literature is limited and differing in opinion, several methods were identified as being used by managers to increase returns. A sample of 46 individual investments made by two Private Equity firms representing large buy-outs in South Africa was selected and analysed to quantitatively investigate the relationship between some of the identified sources of return and the Internal Rate of Return achieved on each investment. Surprisingly the relationships were not found to be as strong as expected and in many cases were not supportive of the findings in the literature. Only earnings growth and an increase in the earnings multiple had a significant impact on the IRR achieved according to the sample analysed. The author concludes that investing in Private Equity is too interdisciplinary to distil the sources of return into a few concise elements. Proprietary knowledge, expertise, superior management skills, relationships and experience all seem to play a role in providing Private Equity managers with a competitive edge over their public market counterparts. The sources identified in this report are very relevant. However, to empirically prove the individual relationship between each of those sources and the superior returns achieved by Private Equity managers remains a challenge, as their success is vested in their ability to artfully combine these methods in perpetually different combinations according to the merits of each situation. / AFRIKAANSE OPSOMMING: Private Ekwiteit is besig om vinnig te groei as alternatiewe bateklas vir beleggers in Suid-Afrika. Plaaslike en internasionale literatuur bied oorweldigende bewyse wat dui daarop dat Private Ekwiteit bogemiddelde risiko-aangepaste opbrengste sowel as portefeuljediversifikasie-voordele inhou. Private Ekwiteitbestuurders hef redelike hoë fooie en beleggers mag dalk bekommerd wees oor die vermoë van hierdie maatskappye om hul bogemiddelde opbrengste vol te hou. Hierdie navorsingsverslag adresseer die vraag oor hoe presies Private Ekwiteit- bestuurders dit regkry om bogemiddelde opbrengste te realiseer. Alhoewel die beskikbare literatuur beperk is en opinies daarin vervat verskil, is daar verskeie metodes geïdentifiseer wat bestuurders gebruik om opbrengste te verhoog. `n Steekproef is gekies wat bestaan uit 46 individuele beleggings verteenwoordigend van groot uitkoop-transaksies in Suid Afrika. `n Analise is gedoen om die verhouding tussen geïdentifiseerde bronne van opbrengs en die gerealiseerde Interne Opbrengskoers op `n kwantitatiewe wyse te ondersoek. Die bevindinge was verrassend in die sin dat die verhoudings nie so sterk was soos wat verwag was nie en in baie gevalle was dit glad nie ondersteunend van die bevindinge in die literatuur nie. Slegs verdienstegroei en toename in waardasie-veelvoude het `n beduidende impak gehad op die Interne Opbrengskoers wat behaal is volgens die steekproef wat ontleed is. Die skrywer kom tot die gevolgtrekking dat 'n belegging in Private Ekwiteit te interdissiplinêr is om die bronne van opbrengs te distilleer tot `n paar spesifieke elemente. Inligting, spesialiteits-kennis, fantastiese bestuursvaardighede, persoonlike verhoudings en ervaring is alles elemente wat aan Private Ekwiteit-bestuurders `n mededingende voordeel bied. Die bronne van opbrengs wat in hierdie navorsingsverslag hanteer word, is baie relevant. Dit bly egter `n uitdaging om empiries die individuele verhoudings tussen hierdie bronne en die bogemiddelde opbrengste wat behaal word te bewys, aangesien Private Ekwiteit-bestuurders se sukses juis lê in hul vermoë om kunstig hierdie verskeie metodes te kombineer in ewig veranderende kombinasies na aanleiding van die meriete van elke geval.

This thesis evaluates the risk-return characteristics and diversification benefits of fine wine investment. It compares the historical performance of wine to that of equity, fixed income, real estate, and commodities. I calculate the correlation, volatility, and expected returns of these assets to examine whether adding wine to a portfolio increases its risk-adjusted return. I do this through the Markowitz portfolio optimization technique. The findings suggest that wine has a low correlation with traditional assets, providing diversification benefits. My results also show that adding wine to a portfolio increases its risk-adjusted return only when there is an allocation constraint of 0 to 25% per asset. This does not hold, however, when there are no asset allocation constraints.