Stronger synchronisation of equities and government bonds is also likely to shape the coming years

The time of the static asset allocation is over. Prof. Dr. Bernd Meyer shows that a stronger synchronisation of equities and government bonds is likely to shape the coming years. The resulting decrease in diversification requires multi-asset investors to be more flexible and to look for alternative hedges.

For a long period, government bonds with a long duration offered the almost per-fect hedge against price losses in risk assets. They generated positive returns and, as safe havens, regularly compensated for part of the losses during stock market cor-rections. This correlation property between government bonds and equities was crucial to the success of static multi-asset approaches. Today, investors struggle not only with the low yield but often with negative expected returns from government bonds. Also, the relationship between government bond and equity performance, which was predominantly negative for many years, is currently rather positive. The current pattern is likely to dominate in the coming years as well. This synchronisa-tion reduces diversification in portfolios, causes difficulties for risk-conscious inves-tors and requires multi-asset investors to take a more flexible, opportunistic ap-proach and seek alternative hedges rather than a static mix of equities and bonds.

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Author

Prof. Dr. Bernd Meyer
Chief Investment Strategist and Head of Multi Asset
Phone +49 69 91 30 90-225

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Fundname
ISIN | WKN:
Performance
1 year
Volatility
1 year
NAV

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DE000A1H6HG5 | A1H6HG
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ISIN: DE000A1H6HG5
WKN: A1H6HG
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Volatility 1 year: 5.02%
NAV: 56.17 EUR

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DE000A1C0UM4 | A1C0UM
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ISIN: DE000A1C0UM4
WKN: A1C0UM
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Volatility 1 year: 5.01%
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DE000A0RE972 | A0RE97
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WKN: A0RE97
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Volatility 1 year: 6.06%
NAV: 45.03 EUR

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ISIN: DE000A0MWKF5
WKN: A0MWKF
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NAV: 62.88 EUR

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WKN: A0RC5F
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Volatility 1 year: 9.50%
NAV: 74.15 EUR

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LU1878856043 | A2N6AQ
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ISIN: LU1878856043
WKN: A2N6AQ
Performance 1 year: -7.27%
Volatility 1 year: 8.81%
NAV: 118.29 EUR