Ulf Füllgraf, Managing Director, Alpha-Centauri
Multi Asset has been one of the most successful strategies with respect to attracting new assets over the last fifteen years. But the tides might turn in the decade ahead.
Low returns from bonds as one of the longest bond bull markets in economic history - according to research from BoE- is finally over. High levels of government debt, reinforced by the COVID 19 pandemic, might lead to an ongoing low interest rate scenario and “financial repression” (negative real rates) for decades to come. Low equity returns should be expected because of low earnings growth - especially in Europe, where index earnings are lower than 10 years ago - or high valuations like in the US.
Diversification across asset classes doesn´t work anymore. Bonds lost their diversification benefits over the last couple of years, which leads to higher overall risk in Multi Asset portfolios. For a similar level of volatility and drawdown than during the past 15 years, exposures to risky assets should be lower – in contrast to what investors are doing today.
Implication might be the end of Multi Asset as it has been delivered over the last 15 years. New sources of return and diversification are needed and classical asset allocation, as we know it, must be replaced by risk-based - or total portfolio approaches.
The webinar is about new sources of return, combining traditional and alternative risk premia in one portfolio, new sources of diversification as risk mitigation strategies might be more effective than bonds in the years ahead and a Total Portfolio Approach as a more risk-efficient framework than classical asset allocation.