Misplaced fears in defensive assets

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Livewire Markets

Bonds are typically viewed as a defensive component of an investor's portfolio. They tend to perform best when your riskier assets are doing poorly. Stuart Dear, Deputy Head of Fixed Income at Schroders Australia says the analysis they've conducted shows this relationship has held true in all but one circumstance over the past 20 years.

However, with the impact of QE on all asset classes, there's been concerns that bonds no longer offer these same defensive characteristics against riskier assets like equities. Dear argues that evidence on correlations breaking down or diversification becoming less effective is mixed. In this short video, he explains why investor fears about the defensive nature of bonds are misplaced. 


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