Multi-managers should frequently monitor their underlying holdings for signs of common risk allocations, according to AllianceBernstein.

The phenomenon of crowding, where managers have similar investment themes and participate in the same trades, was especially apparent after a financial crisis, AllianceBernstein chief market strategist Vadim Zlotnikov said.

"It is our ambition not to make the same mistake as during a crisis. The result is often crowding," Zlotnikov said.

One of the forms of crowding coming out of the global financial crisis was the flight to short-horizon risk management investments, where the exposure to risky assets was reduced, he said.

"This has seen a growth in products that reduce volatility, risk parity products, tail protection, tactical asset allocation, volatility targeting and 'black swan' products," he said.

To mitigate the effects of crowding, asset managers should look for diversification in areas of investment that were expected to benefit when the market turned, while reducing exposures in the more crowded areas, he said.

"The most contrarian bet today is that the world will not come to an end," he said.

"I'm not going to tell you that the world is not coming to an end, but you still need to prepare for the chance that it might not."

Zlotnikov sees, for example, good valuations in the leveraged buyout (LBO) market.

"The percentage of companies that are cheap enough for LBOs is about 20 per cent," he said.

"You should have seen private wealth, sovereign wealth funds and LBO firms come in and buy, but you don't."

He said it was somewhat tricky to deal with crowding, because if a contrarian trade was made too early, too much might be lost before the trade paid off.

"How do you deal with crowding ... because if you are early, you are just wrong," he said.

One option to mitigate the effects of crowding was to buy portfolio insurance, although that was a relatively expensive way to deal with the issue, he said.

Zlotnikov also pointed out managers could diversify more across investments with different investment horizons, with cash being at the shortest horizon and thematic or private equity investments having among the longest horizons.

"You need to determine the most capital-efficient, low-cost diversification strategies," he said.

Recently, MLC Investment Management terminated an Australian equity mandate with Concord Capital because the company realised many of its Australian equity managers invested according to similar themes.

MLC moved the majority of the Concord mandate into a passive strategy with Vanguard.

Zlotnikov said that, in general, diversifying into passive strategies would dilute the risk of crowding, but not mitigate it.

However, he did say solving the problem of crowding within a narrow asset class, such as Australian equities, was much harder to do than within a multi-asset portfolio.

In multi-asset portfolios, the positive effect of allocating a slice of the portfolio to a so-called diversification capital bucket could deliver between 5 per cent and 10 per cent outperformance at market inflection points, while the cost in trending markets would come in at about 150 to 300 basis points, he said.