GLOSSARY	Efficient Frontier
	Efficient Frontier

Efficient Frontier Is a technique to analyze and select the best elements to include in a portfolio.

Efficient Frontier analysis was originally developed for financial portfolio management. The concept was popularized by Dr Harry Markowitz, who won a nobel prize for his work on Portfolio Management in relation to financial investments.

The concept essentially says that you should always pick the investment (or project) that offers the highest level of return for a given level of risk. The technique is based around looking at return vs risk, plotting alternative investments against these two axes. Bubble charts are now frequently used.

Efficient frontier analysis can be applied to project portfolio management. However, there are many differences from the financial application. Firstly, projects typically aim to address a range of strategic and marketing goals, as opposed to a singular focus on financial return. Secondly, projects and programs are not as easily traded as financial investments - put another way there are typically large costs incurred to close down one project and switch resources to another. Thirdly, projects typically demand a complex and usually constrained mix of resources, probably requiring different skills or roles to be filled.

More on Efficient Frontier at:

• Project Portfolio Management

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