Premium Investment Service (June 2024)

Duration – The Eternal Disappointment

Humans typically suffer from the fallibility of using only the past 3-4 years as a frame of reference, rather than the broad breadth of history. This is a well-documented behavioural fault known as ‘recency bias’ within the school of thought known as ‘Behavioural Finance’. Well, going by the last 3-4yrs experience with duration, it’s been an eternal disappointment. But is this assessment justified? And more importantly, should we carry this assessment forward and make changes to our duration exposed Vanguard Global Agg position in acknowledgement that it is an ‘eternal underperformer’? This thematic looks at the broad breadth of history to answer this question and to seek rationales as to appropriately size the duration exposure within our client portfolios for varying macroeconomic outlooks…

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