Correlation spikes leave multi-asset managers nowhere to hide

Increasing correlations between assets classes have left "no place to hide" for multi-asset managers as concerns over a tapering of US QE hit home.

HSBC’s ‘risk on/risk off index’, which measures the correlations between 34 global asset classes, spiked sharply at the end of June as correlations increased across the board. Fund sector research for H1 from Fitch Ratings also shows multi-asset funds have recently suffered as equity/bond correlations turn positive in falling markets for the first time in three years. The agency warned multi-asset funds will have to increasingly resort to cash, short duration assets and derivative hedging as there is “no obvious place to hide”. Mike Deverell, investment manager at Equilibrium Asset...