AMAN RAMRAKHA OUTLOOK Traditionally, portfolios have been made up of cash, bonds and equities. The classic 60/40 portfolio was generally 60% growth assets or equities and 40% defensive assets, such as cash and bonds. Over time, more asset classes started to feature, for example, property, infrastructure and alternatives such as hedge funds.
In the hierarchy of risk-and-return relationships, cash ranks the lowest, meaning it presents the lowest risk but also the lowest probability of returns. Bonds come next, then equities.
The other area of focus is correlation. If two assets are highly correlated, their price will generally move in lockstep, whether up or down. For low or negatively correlated assets, the price movements are independent of each other.
In an ideal world, defensive assets, such as cash and bonds, are…
