I am using a simulation approach to compare the performances achievable by simple risk management and portfolio optimization for portfolio selection. My problem is that my results indicate that simple risk management outperforms portfolio optimization. Is this possible or is there most likely an error in my simulation?
My simulation approach is as follows. Assume there are N different assets in the universe, each of which is assigned to one of K groups, based on some properties. For each of these assets I have daily returns data for a two-year period. Each iteration in the simulation randomly selects one asset from each of the groups. I.e., K assets are selected and will be assigned a weight in $[0, 1]$ Then, each asset is assigned a weight. The mean-variance approach calculates the optimal weights based on the daily returns data. The naive approach simply assigns the weight $1/M$ to each of the assets in the portfolio. This gives the portfolio returns, from which I calculate annualized portfolio volatility. The results are shown in the table below. Could these results be feasible or could it be that I made a mistake somewhere (e.g., mixed up the column names, incorrectly multiplied returns with weights, etc.)?
Edit: the optimal portfolio is the one with minimal variance over all returns.