Morningstar’s Bragazza: Diversify your diversifiers
It’s not just about historical correlations or equities and bonds
It’s not just about historical correlations or equities and bonds
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Atlantic House Uncorrelated Strategies has attracted £30m so far as volatility ramps up
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Investors need to ‘tread carefully’ with prospect of surging bond yields
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Diversification is not as simple as buying funds in different assets and sticking them together
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BlackRock has identified a higher correlation between equity and bond prices and the US election as the greatest worries in the short-term.
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The financial crisis taught us that in extreme cases the major asset classes are all highly correlated and, as asset allocators have since learned, achieving appropriate diversification for clients is now harder than ever.
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In a world where one can no longer rely on bonds for negative correlation, one has to look for alternative diversifiers.
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Asset class correlation has increased substantially over the past five years and the majority of fund managers now cite it as one of their key investment risk factors, according to a study by CRISIL Global Research & Analytics (GR&A).
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Paul Hughes explains why correlations are set to break down and considers the investment impact.
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