William Bernstein penned an intriguing e-book a few years ago that considered the possibility that correlations are destined to rise among asset classes due to indexing’s growing popularity. “The average investor can build and manage multi-asset class portfolios to a degree that was once the exclusive province of institutions,” the financial planner wrote in Skating Where the Puck Was: The Correlation Game in a Flat World . “As a result, the low-hanging fruit of low correlations has probably been picked.” If he’s right, designing and managing asset allocation strategies faces new challenges in the years ahead. For some insight on how Bernstein’s 2012 observation looks at the midway point in 2016, let’s crunch the numbers for a preliminary evaluation via a broad set of ETFs and mutual funds.
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