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If today’s low-yield environment is giving you that shrinking feeling, we can help.
With interest rates near historic lows and inflation a growing concern, how can you protect and enhance your wealth? Even if rates and yields may rise somewhat in the near term, major trends are keeping them lower for even longer.
At Allianz Global Investors, we believe it’s critical to rethink portfolios to account for this outlook.
Our investment expertise can help you explore new opportunities. So you can keep your expectations high – even when yields are low.
Why are rates and yields set to stay low for even longer?
Rates and yields have been dropping for decades
For more than 40 years, there has been a bull market in government bonds, with prices rising and yields falling. Along the way, we’ve seen a drop in developed-world interest rates.
We believe that several powerful forces – including slow economic growth and low inflation expectations – will keep rates and yields low compared with their long-term averages.
Changes in the global economy are contributing to a lower-for-even-longer environment
When more money is chasing fewer investment opportunities, prices go up and yields down.
So you need to find ways to make your money work harder.
More savings available to invest
The world’s steadily ageing population has more savings to invest, but fewer places to invest it...
Shift towards service-based industries
...partly because the shift towards service industries requires less capital investment…
Impact of slower productivity growth
...and because slower productivity growth means less economic expansion.
Keep your dreams on track
In today’s low-yield world, many investors need to generate reliable income while preserving their purchasing power amid rising inflation. Venturing beyond traditional assets in search of extra yield may be critical – but how should you diversify and manage risk? Here are three ideas.
View your investments as a “barbell” spanning two groups of assets: those for preserving capital (including “safer” bonds and cash alternatives) and those designed to generate growth and income (including emerging-market bonds and equities). A multi-asset solution can also combine elements from each group to target a range of outcomes.
Markets can change quickly, and the optimum mix of assets will naturally need to shift in response. This calls for a highly dynamic approach to positioning your portfolio. Look for ways to be more active, rapidly switching your asset allocation as economic conditions evolve to preserve the benefits of diversification and ensure agile risk management.
Over time, many traditional equity/fixed-income portfolios have shifted decisively towards equities:
A conventional “balanced” portfolio may move towards 50% bonds and 50% equities.
More aggressive portfolios even contain 100% equities with an equity-risk “hedge” overlaid.
Institutional investors may also want to consider private-market assets intended to generate capital growth and additional yield – possibly allocating up to 20% in a typical institutional multi-asset portfolio.
What does today's "lower for even longer" era mean for you?
The forces that have driven interest rates steadily towards zero over the past four decades show no signs of fading. At Allianz Global Investors, we’re well-positioned to help investors rethink their portfolios amid this new outlook – so you don’t need to downsize your dreams.
When yields are low, inflation can have an outsized impact on your investments. Our economists believe that inflation could continue to surprise the markets for some time. That’s why it’s critical to consider how you can combat it.
18/08/2021 | Inflation insights
How private markets can help navigate rising inflation expectations
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