Short-term risk in Axioma’s global multi-asset class model portfolio dropped by 1.29% to 8.48% as of Friday, Feb. 8, 2019. The decline was caused by a combination of lower stock market volatility and a weaker interaction of share prices and foreign exchange rates against the USD. The latter resulted in a greater diversification effect, which was further augmented by a decoupling of interest rate changes and FX returns, as the dollar appreciated, while the recent stock market rally seemed to have taken a breather. Despite the fact that most part of the risk decline was recorded in the three equity buckets, the share holdings remained the biggest contributor, accounting for 88% of overall portfolio volatility. US Treasuries, on the other hand, once again reduced risk, together with the JPY cash position.
Please refer to figures 7-10 of the current Multi-Asset Class Risk Monitor (dated Feb. 8, 2019) for further details.