Alternative Inflation Hedging Portfolio Strategies: Going Forward Under Immoderate Macroeconomics

Alternative Investment Analyst Review - CAIA, Volume 2 (3) 2013

2nd European Conference on Banking and the Economy 2013 Paper - Winchester UK

Eurobanking 2013 Annual Meeting Paper - Paris

15 Pages Posted: 8 Nov 2012 Last revised: 11 Dec 2013

Date Written: December 6, 2013

Abstract

Gone are the days when inflation fears had receded under years of 'Great Moderation' in macroeconomics. The US subprime financial crisis, the ensuing 'Great Recession' and the sovereign debt scares that spread throughout much of the industrialized world brought about a new order characterized by higher inflation volatility, severe commodity price shocks and uncertainty over sovereign bond creditworthiness to name just a few. All of which tend to put in jeopardy both conventional inflation protected strategies and nominal unhedged ones: from reduced issues of linkers to negative long-term real rates, they call into question the viability of current strategies. This paper investigates those game changing events and their asset liability management consequences for retail and institutional investors. Three alternative ways to achieve real value protection are proposed.

Keywords: inflation hedging, portfolio allocation, alternative investment, commodities, real rates, core Inflation, global macro, inflation pass-through, strategic allocation, portfolio insurance, Great Recession

JEL Classification: C58, E3, E4, F01, G1, G2, N20, Q02

Suggested Citation

Fulli-Lemaire, Nicolas, Alternative Inflation Hedging Portfolio Strategies: Going Forward Under Immoderate Macroeconomics (December 6, 2013). Alternative Investment Analyst Review - CAIA, Volume 2 (3) 2013; 2nd European Conference on Banking and the Economy 2013 Paper - Winchester UK; Eurobanking 2013 Annual Meeting Paper - Paris. Available at SSRN: https://ssrn.com/abstract=2171804 or http://dx.doi.org/10.2139/ssrn.2171804

Nicolas Fulli-Lemaire (Contact Author)

Oliver Wyman SA ( email )

1 rue Euler
Paris, 75008
France

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