Investments  

Diversification in a multi-asset portfolio

This article is part of
Guide to managing a multi-asset portfolio in a crisis

He says: “Diversification means different things in a world where you have deflation rather than inflation. Traditional diversifiers work most of the time, but for a period in March they didn’t.

"One of the ways we manage diversification is by [taking exposure to] the Vix volatility index, which is a way of investing in volatility in the market, so the investment goes up in value when volatility is rising, and down in value when volatility in the wider market is falling.”

Time horizons are also crucial. Fahad Kamal, senior market strategist at Kleinwort Hambros, says bluntly that an investor with a decades-long time horizon need only invest in equities, but a shorter time frame than that, requires the use of cash and bonds to manage volatility.