Research Summary

  • Inflation

Making Inflation Work for You

The Investing Benefits of Diversified Real Assets

Portfolio Manager and Director of Research, Real Asset Strategies
Portfolio Manager, Dynamic Diversified Portfolio
August 09, 2013

In the past, investors could rely on index-linked bonds to overcome some of the inflationary fallout on their portfolios. But in recent years, yields on these bonds have fallen so low that they don’t deliver adequate real returns. Is there another way to generate returns that defy the corrosive effects of inflation?

Our research shows that real assets can deliver returns in a variety of inflationary environments (Display). And during periods when stocks and bonds underperformed, a portfolio of diversified and equally weighted real assets advanced by 7.4%. These included tough periods such as 1972 to 1974, and the late 1970s, when global inflation surged.

In this paper, we demonstrate how a combination of real estate, energy, metals and agriculture in a flexible, actively managed portfolio, can help investors enjoy solid returns by capturing inflation sensitivity in ways that traditional equities and bonds cannot.

Past performance and historical analysis do not guarantee future results. Individuals cannot invest directly in an index. Diversification does not eliminate the risk of loss.
January 1972–December 2012
*Real return after adjusting for inflation
Source: Barclays, Bloomberg, Dow Jones, FTSE, Global Financial Data, HSBC, Kenneth R. French Data Library, MSCI, NAREIT, OECD, S&P, US Bureau of Labor Statistics (BLS) and AllianceBernstein

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