Choosing fixed income assets: A nimble approach to a dangerous world

Will government bonds still offer investors a steady and secure income in years to come?

Investors are having to rethink the role of bonds in their portfolios

Historically, government bonds have offered steady and secure income; a safe store of value; and a source of diversification to equities. As a result, modern portfolio theory suggested an optimal allocation of 60% equities and 40%  bonds. And since at least the early 1980s, that has been an enormously successful strategy. But we do not think it will be nearly as kind to investors in the years to come. That is because government bonds no longer provide the benefits I just listed, that investors have come to take for granted. Central banks across the developed world have cut official inter...