Deleveraging
Vontobel Asset Management’s risk-parity product has cut its stock position from 140% about a month ago to around 28%, while its bond exposure remains around 260%, says head of multi-asset Daniel Seiler.
“You reduce your volatility with a negative correlation and if that is not the case anymore, you will obviously need to reduce the volatility with a different measure and this could deleverage your whole portfolio,” he said from Zurich, referring to the link between bonds and shares.
On a positive note, for both asset classes to fall in tandem for an extended period, “what you would need is an inflationary shock and at the moment I don’t see that at all,” Seiler added.
With bond yields now so low, there are others on Wall Street who may disagree.
This article was provided by Bloomberg News.