# The Case for Long-Only Agnostic Allocation Portfolios

## TL;DR

This paper proposes Agnostic Allocation Portfolios (AAPs) as a risk-based approach for long-only stock portfolios that reduces concentration, turnover, and factor exposure while maintaining competitive performance.

## Contribution

It introduces AAPs as a novel risk-based portfolio construction method that mitigates issues of classical methods without requiring active signals.

## Key findings

- AAPs reduce concentration and turnover compared to traditional methods.
- AAPs achieve similar performance to classical portfolios.
- AAPs are versatile for different investment situations.

## Abstract

We advocate the use of Agnostic Allocation for the construction of long-only portfolios of stocks. We show that Agnostic Allocation Portfolios (AAPs) are a special member of a family of risk-based portfolios that are able to mitigate certain extreme features (excess concentration, high turnover, strong exposure to low-risk factors) of classical portfolio construction methods, while achieving similar performance. AAPs thus represent a very attractive alternative risk-based portfolio construction framework that can be implemented in different situations, with or without an active trading signal.