Risk-Based Diversification

Portfolio construction is treated as a convex optimization problem, replacing arbitrary limits with a mathematical process that balances return and risk within clear constraints — including liquidity, costs, and market impact.

Total risk is controlled by a tail-risk limit, ensuring discipline even in adverse and non-linear scenarios.

Beyond aggregate risk, the model controls the risk contribution per asset, preventing hidden concentrations that are not revealed by weights alone.

Risk contribution per asset in the portfolio (tail risk - EVaR)

Why It Works Better

Mean–Variance optimization tends to amplify errors: small uncertainties produce unstable portfolios and unexpected concentrations.

The illusion of visual diversification: even with equal weights, risk is rarely distributed evenly. Without risk contribution limits, a few assets can carry most of the risk.

Our model avoids these hidden concentrations by limiting each asset's risk contribution, incorporating robustness against extreme scenarios, and ensuring real diversification — not merely cosmetic.

W-Capital Gestão de Investimentos Ltda. ("Wise Capital"), CNPJ No. 18.466.767/0001-76, headquartered at Av. Paulista 1636, Suite 706, CEP 01310-200, São Paulo – SP, Brazil, is a securities portfolio manager authorized by the Brazilian Securities and Exchange Commission (CVM), pursuant to CVM Declaratory Act No. 13.439, dated 12/13/2013, and other applicable regulations. Institution adhering to applicable ANBIMA Codes (definitive adhesion). ANBIMA profile: Wise Capital – ANBIMA. The information contained herein is for informational purposes only and does not constitute a public offering, recommendation, investment solicitation, or advice of any kind. Investments involve risks and may result in losses. Past performance does not guarantee future results. Data subject channel (LGPD): [email protected].