Case for Bond Exposure Remains Dramatically Weakened Says Harvest Volatility Management

October 21, 2020

Case for Bond Exposure Remains Dramatically Weakened Says Harvest Volatility Management

The traditional 60/40 portfolio continues to be under question

A put on equities may be among few remaining sources of uncorrelated returns in 2020

NEW YORK–(BUSINESS WIRE)–Harvest Volatility Management (“Harvest”), a leader in options-based yield enhancement strategies, risk reduction, alternative beta and absolute return investment strategies for institutional, family office and high-net-worth investors, has been navigating the current investment climate and continues to believe that a put on equities may be among the few remaining sources of uncorrelated returns in 2020. As the firm has noted for some time, bonds, traditionally a source of safety and income, remain unlikely to deliver either in the current climate as they once were.

According to Harvest Partner and Portfolio Manager Josh Silva, in a recent macro commentary titled Can You Still Own Bonds, “Investors are starved for yield and buying it up at alarming rates. This hunger for yield is pushing rates lower and lower. As a result, investors struggle to attain their respective hurdle rates and they end up extending duration and lowering credit quality.”

“Additionally, managers get creative in ways to obtain a few extra basis points on the lower yielding assets in their book. Often investment managers will pick up off-the-run Treasuries as they have less liquidity and, as such, trade with a higher yield. That practice can help portfolios in normal times but became expensive in March, when the stress in markets made these portfolios illiquid to even the largest institutional players and the largest bond shops in the business,” he added. “The lack of liquidity is not the only negative for bonds currently. We question if they will be able to produce the same type of negatively correlated returns that we saw in 2008, and March of this year.”

Silva concluded that with rates currently lower than they were at the beginning of March, another round of trouble will likely follow this trend of lower highs in Treasury markets, making the prospect of bonds offering an uncorrelated return to equities even more difficult to envision.

With all that in mind, what does provide an uncorrelated return to equities? According to Silva: a put on the equity market. “We maintain that currently this setup makes owning yielding equities with downside protection a more attractive risk/reward proposition than the traditional 60/40 model and will for years to come,” he said.

View the full commentary – “Can You Still Own Bonds” – and learn more about Harvest Volatility Management and its suite of leading yield enhancement strategies here.

About Harvest Volatility Management

Founded in 2008, Harvest Volatility Management (Harvest), is one of the world’s leading derivative asset management firms with approximately $3.6 billion in assets under management as of August 2020.

With an expert team of investment professionals with many decades of combined experience managing volatility and option related strategies, Harvest provides its client base of institutional, family office and high-net-worth investors a suite of yield enhancement strategies, risk reduction strategies, alternative beta strategies and absolute return investment strategies that seek to enhance yield and reduce asset class risk exposures for clients.

To learn more about the firm, please visit


This general market commentary should not be the basis of an investment decision and does not constitute an offer to sell or solicitation of an offer to buy any security. The views and opinions expressed constitute the author(s) judgment based on current market conditions, are subject to change without notice, and may differ from those expressed by other areas or employees of Harvest Volatility Management LLC (“Harvest”). Any securities or indices referenced are shown for illustrative purposes only, and are not intended as a recommendation or endorsement by Harvest or by the author(s). In calculating assets under management for Harvest’s overlay strategies, Harvest utilizes notional valuations and mandate sizes instead of market values. This document may contain expressions of opinion, which are subjective and may be unsubstantiated, and should not be relied upon in making an investment decision or for any other purpose.


Patrick Phalon/Chris Sullivan
MacMillan Communications
(212) 473-4442

By: Josh Silva

Partner, Portfolio Manager
Institutional Strategies

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