Discover Amundi Investment Institute's new thematic paper on diversification.
On one hand, as energy security, defence and industrial policy move to the centre of national strategy across the globe, new thematic opportunities are emerging. And on the other hand, while US assets remain central to portfolios, their market weight has moved far beyond the country’s share of the real economy, increasing concentration risk across equities, Treasures and the US dollar.
In this environment, investors should reassess their regional exposure and incorporate new ways to diversify in an era of geopolitical ruptures and concentration risk.
Takeaways on diversifying for investors:
1. Decrease US exposure relative to the rest of the world.
Use different building blocks, with and without US exposure, to rebalance concentration risk.
2. Increase EM allocations, across both equities and bonds.
Add gradually to EM if overall allocation is too low. EM bonds, in particular, are appealing as a core part of a diversified allocation, while EM equities allow investors to explore tech themes in Asia and energy/materials in LatAm.
3. Enhance global diversification with a greater focus on the real economy.
Complement market-cap diversification with GDP-weighted diversification.
4. Reassess exposure to Europe to benefit from strategic autonomy.
Focus on sectors that can benefit from the strategic autonomy push.
5. Enhance cross asset diversification with gold and private assets.
Beyond geographic and sector diversification, adding gold and private assets can help enhance risk-adjusted returns.
