A clear lesson for multi-asset investors from 2022 is that real diversification requires harder work. As fixed income failed as a refuge from cratering stock markets, not only did the 60/40 portfolio and its conservative and growth variants underperform severely, they also followed strikingly similar paths.
In our view, this showed how diversification by rigid capital allocations can fail when a crisis strikes. There is a better way, we believe. It begins with an understanding of which risk premia are driving portfolio returns, which ultimately helps to make better-informed decisions.
Yes, that free lunch must be earned, after all! In their latest insight, Aurèle Storno and Alain Forclaz, from the team managing Lombard Odier Investment Managers All Roads multi-asset range, describe how.
This post is funded by Lombard Odier Investment Managers
