To optimise the trade-off between risk and return, investors need to master the art of correlation management. With correlations between equities and government bonds varying significantly over time, do they still represent the core of any multi-asset portfolio, or do investors need to take more active and more risky directional bets?

Daniel Seiler, chief investment officer, Vescore Solutions
Moderator: Alex Proimos, head of institutional content, Investment Magazine


Key Takeaways

  • When aggregated over each decade we see that the correlation between US equities and sovereign bonds vary over time and that most recently we see a negative correlation.
  • In creating a robust multi-asset portfolio, investors are looking to draw upon the risk premia associated with currencies, volatility, commodities, equities and bonds.
  • Whilst there is a desire for smooth capital growth the reality is that alpha varies over time and produces lumpy distributions.

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