Deep Dive: Three reasons to diversify equity-bond mix

Uneven and insecure recovery

Sunil Krishnan, head of multi-asset funds at Aviva Investors, dives into absolute return

With the simple equity-bond portfolio having performed so strongly in recent years, the role of absolute return managers has come under increasing scrutiny. Put simply, the optimal hindsight strategy has been to hold as much equity as possible. Even the volatility of 2020 seemed to prove the rule as a 35% drop in global stock markets prefaced a 100% rally. Hyper-activist central bank policy allowed bonds to cushion the volatility with a 100bp decline in US real bond yields from the end of 2019 to now. However, there are three reasons to consider the possibility that a simple equity-bond ...