The return of higher inflation for the first time in decades "changes everything" for multi-asset investors, according to the guests on the latest FTAdviser podcast.
Charlie Parker, managing director at Albemarle Street Partners, told the podcast: "There was a period where it seemed as though inflation would never return. But now it has, and that effects very part of a portfolio.
"It certainly means that lower risk assets can provide a decent yield for the first time in years, and that impacts the other assets in a portfolio. But also it means that the types of equities which do well is different."
Meanwhile, Eugene Philalithis, head of multi-asset investments for Europe at Fidelity, described the return of inflation as "a major challenge for multi-asset investor", but argued that there are also opportunities as a result of it.
"For example, higher inflation changes the correlation between asset classes, with bonds and equities now inversely correlated, and that is very useful," he said.
"We also use other assets than just bonds for inflation protection, for example, we use real assets as well."
Alex Crooke, who runs the Bankers investment trust at Janus Henderson, was also on the podcast and said that while inflation was very high in 2021 and 2022, and this proved challenging for equity markets, the signs are now that inflation is falling.
You can listen to the full podcast by clicking on the link above.