The typical asset allocation strategy where the portfolio pie is neatly cut into 70% equities, 25% bonds, 3% commodities and 2% cash does not always deliver the promise of reducing volatility without diminishing returns, according to a new study by Professor Fernando Diz of Syracuse University's School of Management. Investors do not have to over-indulge in garden-variety common equities and can reap the same benefits by pursuing alternative investment approaches.

Although the study looks at the unprecedented stock market bull run in the US from June 1985 to August 1999, Diz says the findings could also apply to the European markets 'where institutional investors are also restricted to the traditional asset allocation strategies'. Diz found that the different 'asset classes' within the equity families of Russell 200, Nasdaq Composite or S&P 500 did 'not provide adequate portfolio diversification'.