Why investors need normalisation of risk/return trade off

QE and inflation have skewed curve

Former Barings CIO Michael Hughes has said the time has come for global asset allocation to be geared towards a normalisation of the risk/return trade off.

Speaking ahead of his keynote speech at the Investment Week Fund Management Summit, Hughes said the flattening of the risk/ return curve created by decades of market distortion “cannot remain”, as investors are no longer being paid to take risk. “If you look at returns over the past 20 years – whether it is in bonds, equities, or alternatives – the average return has been around 7%-8%, and this cannot become the norm,” he said. “The first thing to prepare for is a normalisation of that risk/return trade off. While it is not yet clear how this will take place, asset allocation should n...