Efficiency is highly regarded when managing a portfolio and spans all activities i.e. risk management, communication management, etc. A portfolio is considered efficient if it

Lying above the efficient frontier curve is theoretically impossible under the Efficient Frontier model; no portfolio can achieve returns above the curve for a given risk level.

Minimizing risk to the maximum is not the definition of efficiency; a risk-free portfolio with near-zero returns would not be considered an efficient portfolio in business terms.

Lying below the curve means the portfolio is sub-optimal - it is delivering less return than possible for its level of risk, which is the opposite of efficiency.

The concept of portfolio efficiency in portfolio management is borrowed from Modern Portfolio Theory and the Efficient Frontier principle. An efficient portfolio is one that cannot produce a higher expected return without accepting additional risk, meaning it sits on the optimal risk-return boundary. This definition directly informs how portfolio managers select and balance components to maximize value within accepted risk tolerance levels.