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APAC investors embrace niche strategies for uncorrelated returns

Following the historic breakdown of traditional equity-bond diversification, institutional portfolios Asia-Pacific are increasingly pivoting toward alternative income, market-neutral, systematic macro and ILS to secure uncorrelated returns.
APAC investors embrace niche strategies for uncorrelated returns
Key Points
  • Investors are moving away from the traditional 60/40 model toward "risk-factor diversification" to counter stock/bond correlation and equity concentration risks.
  • There is a growing appetite for lower-beta, market-neutral, and systematic macro hedge fund strategies that can exploit market dispersion without directional risk.
  • Securitised credit and capital call loans are gaining traction as high-quality alternatives to traditional corporate bonds, offering floating rates and illiquidity premiums.
  • While niche assets like Insurance-Linked Securities (ILS) and royalties offer maximum decorrelation, they currently require more investor education for broader regional adoption.

The traditional 60/40 portfolio model is facing unprecedented scrutiny with investors turning towards decorrelated assets that could potentially offer resilience and genuine risk-factor diversification.

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