Investors are rethinking the roles of certain asset classes in their portfolios due to the coronavirus pandemic and its impacts on markets.
The pandemic has created the need for resilient investing, with new assumptions and new asset allocations, panellists at the Pensions and Investments WorldPensionSummit said, Monday.
For some, that may mean moving away from assets that are traditionally seen as safe havens.
As a result of aggressive monetary policy by central banks, the pandemic has led to the need to reframe the relationship that the State of Wisconsin Investment Board, Madison, should have with U.S. Treasury bonds, at the time when rates and yields are low, said Brian Hellmer, managing director, global public market strategies. The board manages $126.3 billion in assets.
Bonds had provided hedging qualities and return generation before the pandemic but now only have one of those features. He said bonds are an insurance policy that have a cost without producing an ongoing, real return. “That’s a structural immediate to long-term challenge for us,” he said.
Mr. Hellmer said his fund has to consider exposure to the asset class at a time when it may seem counterintuitive to walk away from what some may perceive as being the safest asset class, because pricing has created an expectation of these assets giving no real return.
Still, “the way the market has responded (to the pandemic has) created sectoral and regional opportunities,” he said. “We found ourselves looking away from the U.S. to other developed markets, emerging markets,” he said.