Lower for longer is over – and the traditional negative correlation between stocks and bonds has vanished, at least for the time being. This issue of Risk & Reward features two articles that analyse what this means for portfolio insurance and asset allocation. Read on to learn why it’s time to rethink popular approaches, and why the times for investors may be better than many believe!
Dynamic Proportion Portfolio Insurance strategies certainly benefit from periods of higher interest rates: the cushion increases, returns go up and insurance costs go down. In our feature article, Invesco analysts describe just how this works and show how to take advantage of it.
We then demonstrate ways to make the most of positive correlations between stocks and bonds. This may be a challenge for traditional asset allocation – but who said we need to stay traditional? If one looks just a bit further, uncorrelated returns are still possible. Our innovative factor strategies provide the necessary building blocks.
Next, we turn to short sellers: They are often regarded as eternal pessimists, and sometimes they are blamed for stock market crashes. But they have an important role to play in price discovery, especially because they are usually well informed. Find out how we use shorting data to improve portfolio performance.
In the ESG category, we look at Paris alignment. Many investors seek to align their portfolios with the 2°C target for global warming – but the variety of available strategies makes for a confusing landscape. In line with our factor-based investment philosophy, we’ve developed a process that balances climate protection with return targets.
Finally, we continue our series on tax-optimised portfolio management, this time showing how to transition a portfolio without a hefty tax bill right from the start.
We hope you enjoy this edition of Risk & Reward.