Niels Jensen's market letter from Absolute Return Partners to investors notes how Modern Portfolio Theory (MPT) has become less effective over time. Over the past few years we have written several posts (here and here) on the problems with MPT. One chart in Jensen's market letter displays the increasing correlation between asset classes that has developed since 2000 thus limiting the effectiveness of diversification as outlined in Modern Portfolio Theory.
Additionally, the market letter notes the outperformance of "quality" stocks versus say growth or value. As the letter states, quality refers to the strength of a company's balance sheet as well as the sustainability of its dividend policy.
A key for investors is to understand the approach taken by their investment manager in constructing their investment portfolio.