Only shares, government bonds and commodities are "real asset classes" and would be sufficient to construct a robust portfolio, says Anja Nieberding, Head of Multi Asset Class Sales Germany at Vontobel Asset Management, on institutional-money.com. Corporate bonds, on the other hand, should only be added to a portfolio to achieve a certain target yield, and they do not contribute to additional diversification.
According to the Vontobel manager, a corporate bond segment can be explained and replicated by a mixture of shares and government bonds. While the two building blocks were real asset classes, corporate bonds would only be an asset segment. However, in periods of heavily declining capital markets, the corporate bond segment is under severe pressure due to a lower liquidity and loses more value than the mixture of equities and government bonds.
Because stocks and government bonds are usually negatively correlated, they can be used for diversification. In periods of high inflation, however, they can also lose value at the same time. Since the value development of commodities can not be replicated by shares and government bonds, this asset class is also suitable for diversification. "Proactive and broadly managed, the three asset classes equities, government bonds and commodities are thus the necessary components of a robust portfolio," says Nieberding. However, since all three asset classes can come under pressure at the same time, the managers recommends a forward-looking risk spreading strategy.