Diversified core equity
Maximum Diversification®
A patented, prediction-free approach to building highly diversified equity core portfolios.
Key facts
- Approach
- Quantitative, prediction-free diversification
- Origin
- Flagship process founded 2006
- IP
- Patented process (US, Japan, Australia, Canada)
- Asset classes
- Equities; extensions to fixed income & multi-asset
The problem
Market-cap benchmarks concentrate risk in a handful of correlated winners. Many “diversified” portfolios still inherit that concentration, leaving institutional cores exposed to the same factor shocks.
TOBAM thesis
TOBAM’s Maximum Diversification® process does not use predictions of assets’ expected returns. It maximises a mathematically defined Diversification Ratio so the portfolio captures breadth of risk contribution rather than market-cap gravity — the foundation of what became known as Smart Beta.
How it works
- 1
Define diversification rigorously via the Diversification Ratio rather than simple security count.
- 2
Construct long-only equity portfolios that maximise that ratio under investability constraints.
- 3
Apply the same philosophy across equity universes and complementary fixed-income / multi-asset applications.
Evidence & research
The Maximum Diversification® investment process is supported by original research and has been patented in international jurisdictions including the US, Japan, Australia, and Canada. TOBAM also administers related index series as an EU benchmark administrator on the ESMA register.
Vehicles & access
- Pooled funds and mandates across major equity universes
- TOBAM Maximum Diversification® Index series
- Customised implementations via TOBAMSolutions®
Invest via TOBAMDirect — online subscription for selected strategies.
Go to TOBAMDirect →FAQ
How is Maximum Diversification® different from equal-weighting?
Equal-weighting ignores correlation structure. Maximum Diversification® explicitly maximises a diversification ratio that accounts for how risks interact, seeking broader risk contributions across the portfolio.
Does the process forecast returns?
No. TOBAM’s Maximum Diversification® approach does not use predictions of assets’ expected returns; diversification itself is the objective.