With bond yields rising and the promise by the US Federal Reserve of a more aggressive stance towards the longer-term outlook for rates, we are arguably at an inflection point.
These moments in time are often chaotic and correlations could become more irregular, and at times break down. How do we position an equity portfolio that is robust enough to withstand such a climate?
We cannot know what lies ahead but there are many potential pressure points:
- How do we make best use of diversification when correlations become unstable?
- Low volatility strategies have proved popular in recent years, but do they still have a role in a rising yield environment? At the same time, Value has been making a comeback. Should we add it to the portfolio? Or are these the wrong questions to ask and should factor and style exposures be part of a strategic asset allocations rather than the subject of a rotational process?
- Will the relentless focus on costs drive investors to more passive strategies?
- As the focus has shifted away from returns and more towards risks, how do we integrate environmental, social and corporate governance (ESG) issues. Do they represent unaccounted for costs that reach beyond the classical business cycles, or are they an attempt to introduce a form of human morality into the impersonal investment models rather than an investment decision?
In 2017, the Investment Innovation Institute’s Equities Forum will be expanded by a half day program focussing on equity alternatives.These questions and others will be discussed at the second [i3] Equities and Equity Alternatives program.
To see the photo gallery of this program, please click here.
