Portfolio Risk Mitigation without Bonds

Abstract

When it comes to financial market crises, times are always different. To make things worse, global government bonds worth trillions of dollars have yields close to zero, and in many cases below zero. What is left is maximum price downside and rather little upside. The traditional way of managing portfolio risks, by using government bonds as a crisis risk offset, seems—for the time being—no longer to be the straightforward option, rendering traditional stock/bond portfolios less appealing. So, the author asks the question of which risk management alternatives are left and tries to make a critical assessment of their opportunity cost and risk-reduction potential.