Odd Lots Krishna Memani on Wall Street's Very Expensive "Free Lunch"
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May 30, 2025 
Krishna Memani, Chief Investment Officer at Lafayette College and former CIO at OppenheimerFunds, dives into the myth of diversification in investing. He discusses how U.S. tech stocks have dominated returns while international diversification has lagged. Memani critiques traditional investment strategies and suggests it's time to rethink finance theory in light of recent performance trends. The conversation touches on how changes in global markets, particularly in Europe, might influence future investment flows.
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Rethinking Diversification's Track Record
- Diversification is traditionally seen as the biggest free lunch in investing but has not worked well for the last 30-40 years.
- This challenges the classical CAPM-based investment principles and prompts a need for reevaluation and fresh research.
US Tech and Dollar Flows Drive Outperformance
- US tech supremacy, driven by profitability and low interest rates, heavily contributed to US outperformance vs international markets.
- Large capital inflows to US equities were driven by dollar strength and growth-interest rate differentials.
Domestic Flows Key To Market Stability
- Domestic investor flows are crucial to sustained equity market returns, as seen in India where domestic investors now drive performance.
- Foreign investor dependence can cause volatility during global risk-off moments, as happened in Indian markets previously.