Global Matters Weekly – 24 August 2020

The road map to success
by Stephen Nguyen, CFA

At today’s historically low yield levels, bonds offer significantly less protection and diversification benefit compared to the past. In this new low rate environment, the traditional ‘balanced’ portfolio may no longer be balanced. We spend a lot of time deriving the optimal SAA for our clients. Our optimisation is multi-faceted and goes beyond simply maximising returns for a given amount of risk. We include a wider range of asset classes in our SAA’s to increase the naturally occurring diversification benefits and consider how those asset classes behave in combination with one another. Based on these optimisation metrics, we then generate thousands, sometimes millions, of possible portfolio combinations.

Market Snapshot

  • A mixed picture as global equities returned 0.4% last week
  • Global deaths from Covid-19 surpass 800K
  • Brent crude fell 1.0% ending the week at $44.4 a barrel
  • Gold fell -0.2% to end the week at $1940.5 an ounce