"As far as the Harvard model is concerned with Singapore, one has to look no further than how they handled the sales of some of their bank holdings, right at the bottom. I can definitely remember seeing their exit from BAC and remarking, sell when others are buying, and buy when others are selling (from Templeton?) As far as Harvard is concerned look no further than when Mohamed El Arian (spelling my fault) left and went to Pimco, and HOW LONG they took to replace him, 9 months at least, who was looking after the hedges he put in place, not enough mention of that. In addition if you do not need the money and do not sell, is it really a loss? We were all patting ourselves on the back with our diversification, and then correlation went to 1. If you go ahead with building projects and need to liquidate at the wrong time performance will suffer, just look at the rally the last year.

"Thanks for your great work."

David Fuller's view Thanks very much, not least for these absolutely valid points on the Harvard model discussion. It would not be surprising if the Government Investment Corporation of Singapore was somewhat anti American investments, having been badly burned in Citigroup and perhaps other mendacious banks. They backed the wrong horse.

The important lesson for all of us to take away, I suggest, is that when diversification correlations do very occasionally go to 1, instead of panicking after the event, we should treat it as a buying opportunity, focusing on the good investments which have been dragged down along with the bad. A necessary prerequisite is to be disciplined in terms of risk control whenever leverage is used. Also, to take advantage of extreme moves one needs to be either reliably cash generative or to retain some cash at all times, regardless of yield.