You win. In either an inflationary or deflationary scenario.
- tbgidley
- Nov 18, 2022
- 1 min read
Copy of LinkedIN post, 2021
You win. In either an inflationary or deflationary scenario.
In asset allocation models and fixed income strategies; Nominal based bonds, Linker’s, Tips, and Sukuk are all being asked to deliver a positive Real return. Yes, one may choose to employ a hedging technique, but this is not available to all participants. The costs, complexities and less than absolute correlations are not available/acceptable to all.
Sovereigns, political subdivisions, corporate structures, and individuals want a cost-effective fixed Real structure where a credit scoring positive for the borrower and the lender is delivered.
Today’s opinions have a standard deviation of +/- 3. Bridgewater to Schwab, Dalio to Jones. Bonds are…Not currently a prudent investment. To other tail of distribution… buy bonds selectively to keep your asset allocations in what is acceptable fiduciary prudence.
With a constant purchasing power based structure, YOU WIN wherever the Nominal rates move.
Will you sleep better if you invest or fund in a structure that starts in a constant purchasing power? Yes
Will you meet or exceed fiduciary responsibility? Yes
Is it a paradigm shift? Not for us to declare, but our research says yes.
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