The Big Question: What are the best diversifiers for investors today? Part II

Guillaume Paillat, multi-asset fund manager
at Aviva Investors

INFLATION-LINKED BONDS AND CASH 

The traditional role of duration as a diversifier in a multi-asset portfolio will remain challenged, as interest rates keep rising from historically low levels and inflation pressures continue to build. 

In fixed income, we prefer to focus on curve strategies and inflation-linked securities as alternative sources of diversification. Holding money in cash rather than bonds should also be a better source of diversification. 

Finally, it is prudent to consider adding alternative strategies to your portfolio, which have the potential to make money in a rising yield environment, rather than relying solely on equity and bonds. 

David Holohan, senior equity investment strategist at Mediolanum

GOLD MINER ETFS 

The outlook for gold is positive at the current $1,200 level. The commodity also offers strong portfolio diversification qualities. 

As we are likely in a late economic cycle environment, several of the market forces that have pressured the price of gold lower may become supportive of its price over the coming year. This is because it is seen as a safe haven investment. This also means any geopolitical risks that emerge could cause the gold price to rise.

Meanwhile, demand for the metal remains strong across several important emerging economies while supply has been hampered by a few large discoveries in recent years. 

A slowdown in the US economy would provide a longer-term boost to the gold price due to falling bond yields and a reversal in the strength of the dollar, which has impeded the performance of gold through 2018.

We invest in gold through ETFs, both those that track the price of gold itself and higher beta ETFs that comprise of gold mining companies. 

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