Insurers Investment Club - Conversation & Breakfast - The Great Bond Dilemma

Presentation: The Great Bond Dilemma

Speakers: Shayne Dunlap, Co-Portfolio Manager and Dr Richard Marshall, Co-Portfolio Manager, Pacific Asset Management

The structural role of long-duration bonds as a reliable hedge is increasingly in question. Correlation regimes have shifted again, with long bonds exhibiting positive correlation to equities — eroding their defensive utility just when it’s needed most.

While short-duration bonds are currently demonstrating negative correlation, they offer limited contribution to total portfolio return, behaving increasingly like cash due to low duration risk.

To generate returns meaningfully above cash, institutional allocators are often compelled to move out the credit curve. However, this introduces greater equity beta and undermines diversification — particularly problematic in risk-parity or liability-aware frameworks.

Against this backdrop, join co-Portfolio Managers, Shayne Dunlap and Richard Marshall to discuss why allocating to liquid alternatives with low duration, low correlation, and the ability to deliver excess returns over cash presents a strategic opportunity. We believe these exposures can help insurance asset owners preserve portfolio resilience while enhancing risk-adjusted return in a regime where traditional fixed income no longer fulfils its historical role.

Shayne Dunlap, Co-Portfolio Manager

Shane is a Founding Portfolio Manager of Pacific’s G10 Macro Rates team. Prior to joining, Shayne worked as the lead Fund Manager at Standard Life Investments. He has worked in fund management and investment banking for 29 years and has actively managed portfolios since 1999 with an excellent track record in G10 Government bonds, interest rates and FX.

Dr Richard Marshall, Co-Portfolio Manager

Richard is a Founding Portfolio Manager of Pacific’s G10 Macro Rates team. Previously having worked as a Named Fund Manager at Standard Life Investments. Richard has actively managed portfolios since 2006 and has an excellent track record of trading G10 government bonds, interest rates and FX with over 18 years’ experience in fund management and investment banking.