Traditionally bonds have represented the yang to the yin of equities. But right now, with the unequivocal risks in bond markets, what alternatives do we have for the lower-risk element of a portfolio?
Well, the view of analysts is that physical commercial property (but not real estate investment trusts), combined with a range of lower-risk alternative absolute return strategies, will suffice at this time.
Finally, let’s not forget cash. It may be delivering next to zero interest, but at least it will not make the losses that many investors are guaranteed to make on bonds.
Mark Woods is investment strategy officer at Fairstone Private Wealth
Macaulay’s duration
Developed in 1938 by economist Frederick Macaulay in his book The Movements of Interest Rates, Bond Yields and Stock Prices in the United States since 1856, this form of duration measures the number of years required to recover the true cost of a bond, considering the present value of all coupon and principal payments received in the future. Thus, it is the only type of duration to be quoted in ‘years’.
Source: California Debt and Investment Advisory Commission
