In a world where negative interest rates are becoming increasingly common place, we are forced to evaluated the role of bonds. For many institutional investors, the reason to invest in them is diversification, after all bonds are usually negatively correlated to equities. But with yields hovering around zero, there is little solace in bond returns during risk off periods.
Yet, bonds provide an Armageddon hedge; if everything falls apart you can at least rebalance from what is left in your fixed income allocation. Furthermore, an investor can choose to go a little further up the risk scale by allocation more to credit, loans or even mezzanine debt. However, this does lead to some serious changes in risk profile and increases correlation with equity allocations.
At the inaugural Investment Innovation Institute’s [i3] Fixed Income, Credit & Currency (FICC) Roundtable we will address this issue and more:
- Is the world facing a Japanisation of its economy and will we face a deflationary spiral that we can’t get out off?
- In times of near zero yields, is it reasonable to go up the fixed income risk spectrum, or do I adjust my return targets?
- Interest rates in Australia are still at a higher level than overseas, but if the situation would reverse is the home bias, either self-determined or regulatory imposed, still justified?
- What about smart beta strategies in fixed income? Do they offer a solution, or mere complexity?
- Cryptocurrencies have started to disrupt currencies. What challenges does the wider fixed income sector face from disruptive technologies?
To see the photo gallery of this program, please click here.
