Burdett: Managers need to adapt as correlations shift

ASSET ALLOCATION

The last few years of bust, followed by boom, in the world's financial markets have subjected investors to the most scary roller-coaster ride.

Investors rightly have been screaming ‘where was the diversification benefit you told me about?’ as they hit another precipitous swoop downwards. ‘Correlations have come in unexpectedly’ was the unhelpful explanation from the fund management ride operators. But have they? Investors have long claimed diversification benefits between equities and bonds. However, investors had typically ditched government debt for corporate bonds in recent years. Only the few who jumped ship early benefitted from the 30% plus positive returns enjoyed by government bonds investors in 2008 as others saw fa...