What’s Your Non-Correlation Story?

The promise of non-correlated or low-correlation strategies / asset classes to offer stability and consistency have been preached for decades gone by. Yet made tougher to stand by as attitudes shifted towards opportunistic allocations to generate alpha as traditional markets roared in recent years. 

We have been reminded again that all bubbles burst eventually… 

The correlation within equities is at extreme levels: in the year thus far, more than 400 of the 500 shares in the S&P 500 have moved in the same direction 80+ times; a level of correlation not seen in 25 years. A decade of quantitative easing and zero interest-rate policy has built up multi-layered and interconnected imbalances in the economy and the investment world: high correlation and high volatility. Brave investors are seeking opportunities in the turmoil, but most are struggling to rebalance and prepare their portfolios for rockier times ahead. 

Portfolio Managers live and breathe low correlation, low volatility, and stable expected returns – if this has been your value proposition, you’re in pole position to solidify that message. You’ll have been framing your strategy as an all-weather, cornerstone, bedrock, etc. style investment… if you’re not kicking and screaming harder than usual now, you’re not doing yourself enough justice: these are the times you’ve been waiting for as markets rotate from growth to value. 

If you haven’t invested time and energy into refining your messaging but are delivering returns above the broader market now, it’s not too late to refine your brand story. Hurry up! 

And lastly, for Managers who are underperforming:  

• Explain the causes and processes behind current fund performance 

• Get more frequent and in-depth with your analysis (and continue to do this as performance improves) 

• Dig back into the passions + pursuits that led you to launching your strategy, and remind investors what it means for the long-haul 

When it comes to raising capital and preserving AUM in the current market environment, what’s your non-correlation story?