Invesco has introduced new elements into the “Deflation Hedges” bucket of the Balanced-Risk strategy, which has a 33% strategic risk weight. Long equity puts and a mix of equity factor bets are partly replacing government bond futures in this part of the portfolio. The aim is to strengthen the portfolio’s ability to weather downturns. Invesco’s recent research has concluded that as yields have approached or crossed the zero bound, the 10-year government bond futures used exclusively thus far in the deflationary sleeve have become less resilient.
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