The optimisation conundrum - assessing the role of bonds within traditional investment funds

However, yields on government bonds are now at multi-decade lows and there is debate over whether the asset class can provide either returns, or perhaps more importantly, risk reduction. Ex-ASI rates trio 'investing without a straitjacket' at Pacific AM This lack of risk reduction has implications for portfolio construction, as bonds at these yields become vulnerable to competition from other assets, including non-interest-bearing products such as gold. We investigate those risks below and find that the correlations of most assets classes cluster together when calculated against co...