Perspectives Blog

Does a perfect policy portfolio exist?

Jeffrey Knight, CFA, Global Head of Investment Solutions and Asset Allocation | May 5, 2014

Risk Parity represents a significant advance in asset allocation, but we don’t believe that there is a single perfect policy portfolio. While Risk Parity works well in neutral markets, we don’t think it is the best policy under bearish, bullish or highly bullish market conditions. We believe that a policy function that rotates among four distinct policy portfolios is closer to perfect than any single policy portfolio. The idea of a policy port…

Constraints of convention – Does a portfolio design have to be static?

Jeffrey Knight, CFA, Global Head of Investment Solutions and Asset Allocation | July 14, 2014

A 60/40 portfolio may appear to be balanced, but when viewed through a risk lens it is clear that the equity allocation comprises a disproportionate amount of the risk. As a static strategy, the very thing that has helped risk parity succeed over time may prove to be its biggest liability going forward, and that is all those extra bonds. Instead of always being accountable to the same neutral portfolio, why not shift accountability to a startin…

The end of “risk-on/risk-off”

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

…but also rose to over 80% during this same period, reducing the benefits of cross-regional diversification. Similarly, correlation between equities and high yielding bonds rose from about 50% to over 80%. When investors took risk, most assets rallied with the exception of sovereign bonds. Conversely, when risk sold off, only sovereign bonds had positive returns. This risk-on/risk-off regime posed a problem for multi-asset portfolios as many of t…

Global Asset Allocation Outlook (June 2014)

Columbia Management Global Asset Allocation Team, | June 30, 2014

elds higher and the recent rally in bonds have provided an opportunity to further reduce duration and reduce exposure to government bonds. In addition, investor positioning in Treasuries is no longer at extremes, reducing the risk of a short covering rally. We also upgraded securitized bonds from a max underweight to moderate underweight. Source: Columbia Management Investment Advisers, LLC. The chart reflects the views of the Global Asset Alloc…

January asset allocation update

Jeffrey Knight, CFA, Global Head of Investment Solutions and Asset Allocation | February 3, 2014

…ests returns from bonds remain unattractive on a longer term strategic basis. Real returns are likely to be low to potentially negative over a longer holding period for a number of fixed income markets. Although interest rate risk remains strategically unattractive, we note that valuation improved considerably during 2013, and we find rates to be closer to fair value for longer duration bonds. In addition, we find that some fixed-income risks rem…

Q&A with Jeff Knight

Jeffrey Knight, CFA, Global Head of Investment Solutions and Asset Allocation | January 6, 2014

xed income? A: I think it is important to think about fixed income differently now than we have for decades. In other words, a large share of fixed income investments are organized against a benchmark index, and typically the risks of that benchmark come overwhelmingly from interest rate sensitivity and not from other characteristics of bonds that still could be attractive. The universe of opportunities in fixed income is wide and varied, and I t…

Credit alternatives in government-backed debt

Columbia Management, Investment Team | June 23, 2014

One way investors may boost yields without taking on undue credit risk is through U.S. government agency debt. While many investors associate U.S. agency debt with very low yields, other types of agency debt can offer significant spreads to Treasuries with a modest decline in liquidity. We have been increasing our allocation to the agency market in core portfolios as a way to reduce credit risk while maintaining competitive yields. By Carl W….