Yoram Lustig is the head of Multi-Asset Solutions, EMEA
RISK – WHERE ARE TODAY’S 'SAFE HAVENS'?
A
s government bond yields have fallen over the last decade, investors increasingly questioned how to effectively diversify equity risk. Only to be reemphasised by the experience of the 2020 corona crisis, three groups of safe havens have not disappointed.
1. Government bonds The traditional diversifier of equity risk is duration risk. Bonds issued by trusted governments – the US, Germany, the UK – with long duration offering enough
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fire power to offset part of stock markets’ drawdowns, have been and are still a haven. During flights-to-quality, investors dump risk assets, rushing to the safety of high-quality government bonds. Low yields mean safety has become much more expensive than it used to be – instead of earning 4% on bonds, investors earn less than 1% or, indeed, pay when yields are negative. However, yields could go lower or turn negative, sending bond prices higher.
2. Currencies Currencies have a pecking order, from safer to riskier. The US dollar, Japanese yen and
