During the past 50 years, portfolio construction for institutional investors has evolved, growing from a basic split between equities and bonds to more complex allocations to a diverse group of investments.  In its sixth annual asset management Industry Evolution Report, Citi Business Advisory Services (Citi) tracks this evolution and examines the recent development of numerous “convergence products” available to investors and fund managers that, according to Citi, have “blurred the lines between distinct asset manager, hedge fund and private equity product sets.”  This article, the first in a three-part series, discusses the methodology employed by Citi in conducting its survey; explores the evolution of modern portfolio theory; examines portfolio weaknesses exposed by the global financial crisis; and reviews the alignment by investors of their portfolios to certain risk factors.  The second article will address Citi’s assessment of the adaptation of products by investment managers to investors’ needs and the evolution of hedge funds following the global financial crisis.  The third article will explore how asset managers may tailor their product offerings and marketing efforts to meet the evolving needs of institutional investors and how they may offer “institutional” portfolio construction to retail investors.  For coverage of Citi’s 2014 survey, see “Citi Survey Highlights Opportunities for Hedge Fund Managers as Institutional Investors Seek to Optimize Their Portfolios (Part One of Two),” Hedge Fund Law Report, Vol. 7, No. 22 (Jun. 6, 2014).