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Alternative Market Briefing

Assets classes were less diversified during the post-2009 recovery

Friday, November 07, 2014

Benedicte Gravrand, Opalesque Geneva:

Welton Investment Partners LLC, a California-based alternative investment manager, examined the behavior of investible assets to better understand the financial recovery since 2009 from what they call the Global Financial Collapse (GFC) in a recent White Paper. Within an asset class framework, they developed a four category model consisting of Equities, Real Assets, Fixed Income and Alternatives, and then populated the framework with 24 common indices to serve as benchmarks. They went back as far as their shortest index record, January 1997, and compared the prior period correlations (1997 to Feb. 2009) to the GFC recovery correlations (March 2009 to June 2014).

Welton concluded that assets were less diversified during the recovery, and that, anyway, resilient diversification is hard to find. "We identified that GFC Recovery correlations strengthened and converged among equity-like investments; Real Assets, notably commodities, took on more of an equity-like character; and previously isolated investments converged to form weak-to-moderate correlations with other investments," the White Paper says.

Among the similarities between the two periods, they found high degree of cross-correlation among Alternatives, Real Assets and Equities. "Despite the appearance of a diversified portfolio universe, comprised of four distinct asset classes and 24 benchmark indices, a ......................

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