THE 60/40 strategy, once hailed as the holy grail of diversification, involves investing 60 per cent of a portfolio in equities and 40 per cent in fixed income. Despite decades of good performance, investors are losing faith in this stalwart of investing. The main reasons for this are the persistently low bond yields, and increasing correlation between equities and bonds.
Years of monetary accommodation by central banks, coupled with technological disruption globally, have resulted in bond yields staying at historic lows. According to the Callen Institute, the supposedly "well diversified" 60/40 portfolio would possess 99.85 per cent equity-risk concentration. However, when real estate, high yield...
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