Carlyle’s Bansal Says Bonds Shed Role as Stocks’ Shock Absorber

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions Saved Articles My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomePMN BusinessCarlyle's Bansal Says Bonds Shed Role as Stocks' Shock AbsorberCarlyle Group Inc.’s asset-backed finance chief said traditional fixed income is losing its reliability as a portfolio shock absorber because those investments are becoming increasingly correlated with stocks.Author of the article: You can save this article by registering for free here. Or sign-in if you have an account.(Bloomberg) — Carlyle Group Inc.’s asset-backed finance chief said traditional fixed income is losing its reliability as a portfolio shock absorber because those investments are becoming increasingly correlated with stocks.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an Account“That diversification benefit that fixed income is supposed to provide, that doesn’t seem to be playing out,” Carlyle’s Akhil Bansal said Monday in a Bloomberg Television interview.The math tells the story, Bansal said: From 2010 to 2020, the correlation between public fixed income and equities was 0.13. That’s an indicator that those investments would tend to move in opposite directions, supporting the idea of bonds and stocks as complementary portfolio choices. But from 2020 to today, “it’s closer to 0.63,” Bansal said.“That higher correlation, we think, is a structural change,” said Bansal, who also published a blog post on his findings.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againBansal attributed the breakdown to quickening inflation. Rising prices simultaneously punish both equities and public fixed income investments, he said, eliminating the diversification benefit that underpinned the classic 60/40 portfolio construction for decades. Citing his recent research, he said he wasn’t advocating a replacement of fixed income but was intended to identify assets capable of generating yield and stability with lower correlation to corporate earnings.“What we talk in the paper is how private ABF is not looking to replace fixed income, but play that role of generating that yield, that diversification that historically public fixed income has played,” he said.Bansal also flagged a second concern: concentration risk in the corporate bond market, where he said investors will find their portfolios mirror the same technology-heavy composition as the S&P 500 Index. Companies such as Alphabet Inc. and Meta Platforms Inc. tend to be categorized under communications or consumer cyclical buckets rather than technology, masking the true exposure to the AI and data-center boom, Bansal said. Carlyle’s credit unit accounts for approximately 44% of managed assets at the Washington-based firm, according to its annual filing earlier this year.While some investors have pushed back against a so-called circular trade in AI infrastructure, which chipmakers such as Nvidia Inc. offering support for their customers, Bansal pushed back against lumping all AI-related ABF investments into one bucket. Chip financing and data-center deals are ultimately supported by cash flows and leases from investment-grade counterparties, he said.“When you look at Carlyle, some of the things we’re doing is we don’t look at AI monolithically, we think about diversification,” Bansal said. He identified energy and natural gas investments as Carlyle’s differentiated ABF focus within the AI ecosystem.(This story was produced with the assistance of Bloomberg Automation.)This advertisement has not loaded yet.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.