The basic asset allocation tenet of bonds vs equities vs cash is seen as somewhat naïve and outdated. With divergence of markets and investment regimes caused by excessive government interference, investors can no longer rely on traditional valuation metrics and expected behaviour of assets.
In the new world of zero bound and negative interest rates, diversification is probably still the only free lunch, but proper implementation may look counter-intuitive. With asset classes less stable and hence more unpredictable, correlations become irrationally distorted.
The search for yield, taking into consideration correlation, valuation and volatility, may need to be re-examined in greater granularity. No longer are broad-brush definitions of markets meaningful.
Is the equity risk premia still relevant? Does traditional risk premia eg “value” still work in the current environment? Or is the increasingly popular use of alternative beta and factor investing more relevant for today’s markets?
While there is a greater appetite for alternatives and unlisted assets, how can investors manage the fee and illiquidity constraints?
Volatility remains a key concern. How should investors position their portfolios in the face of downside systemic risks, but cyclical upside opportunities? Is the risk mitigation system sufficiently robust to support the deployment of tactical and opportunistic approaches?
The fourth annual [i3] Global Investment Strategy Forum, co-hosted with academic partner University of Chicago Booth School of Business (HK), continues to challenge institutional asset owners and investors to re-think portfolio strategy approaches for the long term.
To see the photo gallery of this program, please click here.
