We advise extreme caution in using derivatives to protect portfolios from sharp equity drawdowns. We recommend that investors look to asset allocation to defend against equity risk before buying puts. For those investors who must pursue a tail-risk hedge, we provide a list of potential pitfalls and solutions, in the form of a case study.
Yes, investors should consider diversity in the investment decision-making process, as we expect a diversity of thought and talent will lead to better investment outcomes than a process that ignores this important issue.
The American Rescue Plan Act (ARPA) was signed into law on March 11, 2021, and included a variety of plan sponsor–friendly changes to single-employer and multiemployer pension plans, but no real help for public sector plans. ARPA may change the future landscape of US pension plans, which may prompt plan sponsors to modify their investment strategies to achieve plan objectives. Its impact will vary greatly, both by plan type and individual plan circumstances.
Today, the US Bureau of Labor Statistics released its monthly inflation report for April, which highlighted that prices paid by urban consumers for a basket of goods and services increased by 4.2% relative to the same month last year.
Yes, we expect it will. We anticipate global inflation expectations will remain stable or increase modestly amid rising economic growth, which would allow the equity market rotation into cyclicals to continue.
21st Century infrastructure: The importance of digitisation has grown during the pandemic, as people have relied more on digital platforms, video streaming, and cloud storage. Investment across the digital infrastructure value chain continues to rise in response, and should increasingly be a priority for real asset investors.
In this paper, we analyze the drivers behind the recent rise in yields and compare the current bond sell-off to major bond sell-offs of the past to assess whether the rise in yields can continue and the implications for fixed income.
This paper discusses recent trends in US commercial real estate fundamentals and looks ahead to what might be in store for the remainder of 2021. Overall, we are reluctant to sound overly bullish about the broad asset class, as the outlook for some sectors is unclear. Still, for investors looking to immediately deploy capital, we highlight two categories of opportunities.
The 2020 Emerging Markets edition of our annual report on the history of financial markets provides context for the range of returns investors can expect from equities, bonds, and cash; reveals the importance of various components of equity returns; examines the evidence for equity mean reversion; and reviews the relationship between initial valuations and subsequent returns for equities and bonds. It also analyzes the historic economic declines and sharp asset price movements that resulted from the COVID-19 pandemic in 2020.
Yes, active equity managers tend to perform better when the average stock within a market capitalization–weighted index outperforms the index itself.