Time To Diversify – But Into What?

AQR

Research

9 Pages

AQR argues that traditional portfolios face structurally lower returns and explores where investors can realistically diversify beyond equities and bonds. It challenges the idea that popular alternatives truly diversify, noting many still carry equity-like risks, while suggesting liquid alternatives may offer more reliable diversification when it matters most.

Key Takeaways

Lower Future Returns: Expected real returns for a 60/40 portfolio have fallen from around 5% historically to نزدیک 1–2% based on current yields.
Hidden Equity Exposure: Many alternatives such as private equity and real estate show correlations above 0.6 to equities during drawdowns, limiting diversification benefits.
Liquid Alternatives Role: Trend-following and market neutral strategies historically delivered positive returns in major crises, including gains during the 2008 drawdown exceeding 10%.
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