Stocks, Bonds and Portfolio Diversification
Where should you look for uncorrelated returns?
Surely not across bond and equity markets…well, it all depends on how one dissects the data. Some asset managers argue that the diversification benefits of stocks and bonds have not disappeared entirely. They only need re-thinking. Others are adamant that allocators should look elsewhere for diversification benefits.
Over the long-term, the 60/40 portfolio structure seems to have paid off rather well. However, there are periods when the reverse is true.
CTAs tend to post positive returns even when a 60/40 portfolio is rising. Are these strategies what investors need to diversify their allocations?
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Over the last few years, traditional equity portfolios have encountered more and more difficulties. Is it time for allocators to rethink their approach to equity allocation?
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Investors are witnessing a significant tightening of lending standards, which invariably feeds through to higher default rates as the economic cycle plays out.
In this compendium of research, investors can find everything they need to build a resilient portfolio for the current macroeconomic environment.
Finding strategies to reduce the impact of equity drawdowns without the corresponding loss in expected return is inherently challenging.
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Strategic asset allocation decisions will need to consider how the transition will impact economic and financial variables, including returns from various assets.
Diversifying by allocating to active fund managers is a viable strategy. But manager selection is key. How many active managers have outperformed their benchmark?
FURTHER READING
One of the more difficult questions to answer for institutional investors within the cryptocurrency space is what the appropriate allocation to the asset class is, if any.
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Risk-based portfolio construction is directly linked to the ability to build forecasts of volatility and translate them into investment rules. How good are these forecasts?
For compliance reasons, this paper is only accessible in certain geographies
Despite reduced foreign participation, Chinese government bonds have shown resilience and outperformed most of their global peers.
By: Anton Balint,?Senior Investment Writer