Bond and equity fund correlations have trended up this century   Increasing equity-bond correlations over decades poses questions for traditional portfolio construction. The perceived low correlation between equity and bond returns is the basis of the construction of the “balanced” portfolio. The split between equities and bonds provides diversification benefits that should lead to better risk-adjusted returns over the longer term. Indeed, multi-asset sales (particularly those with a stronger equity tilt) have proven popular over the past three years, despite ongoing volatility and swings in market leadership. A recent study by FTSE Russell has noted that for most of the

In this ‘Product Insight’, we look at how correlation coefficients can potentially ‘break down’ during periods of extreme volatility. Refinitiv Datastream allows users to users to access a library of ‘functions’ which provide cloud-based calculations that are delivered instantly into either excel or charting environments.  A library of approximately 85 functions span across categories including logical, mathematical, statistical, and technical to name a few. For correlation, we need to use the CORR# function: CORR#(Variable1,Variable2,Period/frequency). While straightforward to use within the product, interpreting the end output can be challenging depending on the inputs used.  Certain considerations a user must consider include:

For much of the past decade deflation has been the bogey man of the U.S. and many other markets and this was true even as the U.S. Federal Reserve (Fed) began to unwind quantitative easing and nudge Fed funds away from zero in the closing months of 2016. But concerns pivoted in 2017 away from deflation towards a building threat of inflation reflecting the expectations – and ultimate reality – of a surge in U.S. deficit spending at the same time unemployment was dropping to record lows. The prospect of rising inflationary pressures is reflected in a roughly 1 percentage

This Monday Morning Memo is written based on a speech by Jean-René Giraud, Chief Executive Officer at TrackInsight  during the TrackInsight Investor Summit–Germany in Frankfurt on March 29, 2017. During his speech Jean-René discussed some common errors advisors and investors make as they evaluate exchange-traded funds (ETFs). Tracking error as a measure to evaluate the tracking quality of an ETF The first wrong assumption he stressed was that investors believe tracking error is a good measure to evaluate the quality of an ETF; they think a low tracking error is good, while a high tracking error is bad. He pointed