Content (30)
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White papersPositive Stock-Bond Correlation: Prospects & Portfolio Construction Implications (April 2024)
As part of PGIM IAS’s ongoing research on strategic portfolio construction, we have explored the macro drivers, global linkages, and portfolio construction implications of stock-bond correlation in a series of papers dating back to 2021.
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White papersGreat Expectations: Is engagement living up to its promise?
Is ‘engagement washing’ poised to be the next term maligning asset management’s ESG movement? Institutional investors often engage with companies they invest in to improve those companies’ environmental, social and governance practices – rivalling capital allocation as a core mechanism for achieving sustainable investment outcomes. But do engagement activities really deliver impactful, positive, real-world outcomes?
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White papersCredit Squeeze: from Distress and Dislocations to Steep Discounts
As credit conditions tighten, opportunities are emerging for smart investors. With banks cutting back on lending, pricing dislocations are appearing in financial markets. This looks like a repeat of previous economic cycles, when investors with patient capital have benefited from uncertainty.
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White papersFood for Thought: Investment Opportunities Across a Changing Food System
From farm to fork, our global food system is vast, complex, inefficient and increasingly unfit for purpose. But with the global food system representing just 10% of global GDP, why should institutional investors care?
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White papersWhat to Expect When Expecting A Recession: A CIO’s Guide to Interpreting the Probability of Recession (PGIM IAS, June 2023)
Recessions are a regularity of the economic landscape. While each recession has its own unique set of characteristics, recessions share common attributes with implications for portfolio construction and asset allocation decisions.
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White papersIs There A Need For A Chief Liquidity Officer?
Many institutional investors have a Chief Risk Officer assisting the CIO to measure and monitor portfolio volatility. However, for many long-term investors (e.g., pensions, sovereign wealth funds and defined contribution plans) volatility comes and goes and volatility risk is rarely life-threatening. In contrast, liquidity events can create a sudden and unexpected need to raise cash and can threaten a fund’s survival.
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White papersPrivate vs. Public Investment Strategies – Reported and Real-World Performance
Based on reported cumulative returns, private assets – especially buyout funds – outperformed public assets by a wide margin from 2005 to 2021. However, this traditional performance comparison is misleading because reported performance of private assets does not reflect the real-world performance experienced by CIOs.
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White papersPortfolio Implications of a Positive Stock-Bond Correlation World
US stock-bond correlation has been negative for much of the past 20y. However, regime change – related in part to fiscal and monetary policies and the broader macroeconomic landscape – can occur, with implications for portfolio performance and construction.
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White papersBuilding Portfolios with Infrastructure: Performance, Cash Flows & Portfolio Allocation
Institutional portfolios have been increasing allocations to unlisted infrastructure investments. However, to fully understand how infrastructure investments can benefit their portfolios, CIOs need better information on the performance and cash flow characteristics of this asset class, as well as a multi-asset, multi-period portfolio construction framework that is fit-for-purpose when allocating to illiquid, private investments alongside liquid, public investments.
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White papersMeasuring the Value of a Portfolio Liquidity Line
Cash is needed to provide portfolio liquidity, but it often carries a high opportunity cost. While CIOs may contemplate reallocating a portion of portfolio cash into investment assets to help improve expected portfolio returns, they know that having cash on hand is beneficial to cover unexpected liquidity needs and avoid having to sell assets, especially during poor market environments. But is there a better way to balance the costs and benefits of cash?
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WebinarWebinar Replay: Stock-Bond Correlation: A Global Perspective
For most of their careers, asset allocators have invested in a negative stock-bond correlation world. When stocks fall, sovereign bonds rising generally rise in value – providing a hedge against equities within a diversified portfolio.
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White papersStock-Bond Correlation: A Global Perspective
The correlation between stock and bond returns has been reliably and persistently negative for the last two decades across Developed Markets (DM) – matching the US experience. During this regime, stocks and bonds have hedged one another, dampening overall portfolio risk for a given level of equity allocation.
