State the assumptions behind the portfolio’s market-risk benchmark.

Family Office Private Wealth Journal · Editorial research desk · 2 November 2026

Companion to CAPITAL ASSET PRICES: A THEORY OF MARKET EQUILIBRIUM UNDER CONDITIONS OF RISK by William F. Sharpe.

Decision in practice

A low-beta fund is offered as a substitute for cash. Low covariance with an index says little about whether it can be redeemed during stress.

Committee assignment

Separate expected compensation for market exposure from credit, leverage and liquidity risk. Test the liability the asset is supposed to meet.

Record and decision rule

Record benchmark, beta window and settlement terms. Reject a cash classification when the asset cannot fund the dated obligation.

Illustrative application by the editorial desk. The source authors did not evaluate or endorse this procedure.