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Balanced portfolios: safer without bonds?

Home / Press Centre / Balanced portfolios: safer without bonds?

Tommaso Mancuso, Head of Hermes Multi Asset
11 January 2018
Multi Asset

In his latest publication, Tommaso Mancuso, Head of Multi Asset at Hermes Investment Management, examines how unstable the relationship between stocks and bonds has been in the past. He assesses the risk-return profiles of a traditional 60-40 stock-bond portfolio, a risk-parity portfolio and a risk-managed stock-cash portfolio in a number of regimes.

“For most investors, correlations can serve as a valuable tool to help manage volatility and drawdown risk. And yet correlation is not always founded on stable causality. In fact, the narrative of the stock-bond relationship was discount-factor-driven in the 1960s through to the 1980s; that is, increasing yields caused both stocks and bonds to fall in price. Changes in the market regime can cause structural shifts in correlations and, in time, the prevalent investment narrative. This means that diversifying across stocks and bonds is no substitute for active risk management.”

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Tommaso Mancuso Head of Hermes Multi Asset Prior to forming Hermes Multi Asset in 2014, Tommaso was Head of Management and Partner for Hermes' fund of hedge funds business. From April 2012, he was the portfolio manager for all absolute return mandates. Prior to joining Hermes in 2008 as Head of Research, Tommaso was Global Head of Credit and Event Driven Strategies at Pioneer Alternative Investments in New York, responsible for an allocation in excess of $3.5bn out of $8bn managed in FoHFs by the firm. Tommaso spent a total of seven years at Pioneer Alternative Investments. Tommaso graduated from Bocconi University in Milan with a degree in international financial markets. Further information about Hermes Multi Asset.
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