Perspectives Blog

Engineering a better retirement portfolio

Columbia Management, Investment Team | June 4, 2013

Experiencing a significant portfolio loss in the early retirement years (timing risk) is one of the greatest risks to the longevity of a retirement nest egg (shortfall risk). This risk is typically a function of being concentrated in the wrong asset class — any asset class — at the wrong time. By looking at a portfolio through a risk lens, investors can gain valuable insight into building a portfolio that minimizes concentration risk and can in…

Duration for diversification

Columbia Management, Investment Team | November 19, 2013

Many investors struggle to determine the appropriate amount of bond duration in an environment of rising interest rates. The right amount of duration has to be considered in a portfolio context, because the main value of duration exposure comes through diversification. Because of the negative correlation between duration and the returns of riskier assets, high-quality fixed income will still be a cornerstone of any disciplined portfolio. By Za…

Three tools for a resilient portfolio

Jeffrey Knight, CFA, Head of Global Asset Allocation | January 15, 2014

Portfolio resilience refers to the ability of a portfolio to withstand unanticipated adversity and to respond from that adversity. Effective diversification requires thinking not only about allocating the assets in a portfolio but about allocating the risks. A flexible strategy enables a portfolio to adapt to changes in the relative attractiveness of different risks. Watch: Jeff Knight describes three strategies his team employs in seeking to…

Time for a change

Columbia Management, Investment Team | July 23, 2013

The end of a long bull market for bonds means investors need to redefine how they generate income. In an environment of heightened risk, professional expertise can help investors avoid emotion-driven mistakes. Investors should consider including non-traditional investments in a broadly diversified portfolio. The end of the bull market for bonds means the way that many people have been investing — with a heavy concentration in traditional bond…

Building a resilient portfolio

Jeffrey Knight, CFA, Head of Global Asset Allocation | July 16, 2013

Diversification is the single most important tool an investor has to improve their portfolio’s resilience to negative events. Now is an opportune time for investors to look at ways to protect year-to-date gains and prepare for monetary policy changes. Video: Two investment opportunities that may help stabilize portfolios today. Diversification is the single most important tool an investor has to improve their portfolio’s resilience to negative…

Correlation’s essential role in diversification

Columbia Management, Investment Team | December 5, 2013

Diversification strategies can help mitigate overall portfolio volatility. An important component of diversification strategies is correlation, or the measure of how one security moves in relation to another. Portfolios with lower correlation among assets will experience less overall volatility, even if the underlying assets are equally volatile individually. Most investors have heard about the concept of diversification, the typical expressio…

The end of “risk-on/risk-off”

Anwiti Bahuguna, Ph.D., Senior Portfolio Manager | February 3, 2014

The recent decline in cross-asset correlations may offer better investment opportunities for active managers Lowering both cross-asset correlations and inter-asset correlations provides potential benefits for structuring multi-asset portfolios Active managers should seek non-traditional diversifiers of portfolio performance and remain flexible A notable event of 2013 was the remarkable decline in cross-asset correlations implying potentially b…