Investment Uncut: Moving beyond modern portfolio theory with Jon Lukomnik

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What if everything you know about investment risk is only half the story?

In this episode, we question the limits of modern portfolio theory with Jon Lukomnik, co-author of Moving Beyond Modern Portfolio Theory and credited by Forbes as a pioneer of modern corporate governance.  We challenge a cornerstone of finance and whether it is fit for purpose in today’s complex and interconnected world. What are the hidden vulnerabilities in modern portfolio theory’s risk-return paradigm and why do investors need to think beyond diversification if they want to address emerging systemic risks like climate change, social inequality, and governance challenges?

Before talking to Jon, Jacob speaks to Sapna Patel, Principal at LCP, about LCP’s latest responsible investment report (found here). Sapna provides a summary of the report, the key takeaways and what asset owners can do with the report’s findings.

What’s one thing you would like listeners to take away from this?

• Value and risk are created in the real world. They’re priced in the capital markets but created in the real world.

Any recommendations for good books or podcasts?

• • Moving Beyond Modern Portfolio Theory: Investing That Matters by Jon Lukomnik and James P. Hawley
  • 21st Century Investing: Redirecting Financial Strategies to Drive Systems Change by William Burckart and Steve Lydenberg
  • Anything being put out by The Investment Integration Project or The Shareholder Commons (among others).  It’s a developing field and books tend to be about five years late.  So, it’s important to read what’s being put out now.