Achieving adequate portfolio diversification is never easy, but current macroeconomic conditions are testing the mettle of even the most experienced investors. Eric Upin, CIO of Menlo, California–based investment firm Makena Capital Management, uses his skills as a practitioner of multiasset, endowment-style investing to help the firm’s clients — endowments, foundations, sovereign wealth funds and family offices — navigate global markets. The 51-year-old Chicago native honed his skills in the same role at Stanford Management Co. and joined Makena in 2009, four years after the investment firm was founded by Michael McCaffery, SMC’s former president and CEO, and two of Upin’s SMC colleagues. All investors want stellar returns, but they’re “often unaware of the true underlying risks,” Upin says. Makena relies on the combined talents of its team to help its investors — which include sovereign wealth funds Abu Dhabi Investment Authority, Australia’s Future Fund and Government of Singapore Investment Corp., according to public sources — rationalize the complexities of asset classes, geographies and regulatory jurisdictions. Upin recently spoke with London Bureau Chief Loch Adamson about the intricacies of global endowment-style investing and the biggest challenges that lie ahead.

What risks are of the greatest concern to global investors?

The No. 1 risk in the world that we see investors wrestling with is the potential impact of central banks’ policy response as they’ve tried to combat the deflationary forces of the financial crisis. We’ve seen unprecedented quantitative easing, fiscal bailouts, direct bond-buying and zero percent interest rates. All of those actions — even though they’ve been undertaken for the greater economic good — may have unintended consequences. We don’t yet know what the side effects are going to be on the value and pricing of assets. The biggest risk is that as normal as everything looks now, those policy responses may have created a mirage, or even a set of mirages, that could dissipate quickly.