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The Top-Performing Asset Class You’re Probably Overlooking

01.05.2019

Report on the study "Sovereign Bonds since Waterloo" from Josefin Meyer, Carmen Reinhart, and Christoph Trebesch

Excerpt from the Article

(...) That’s why you should give serious to consideration to external sovereign bonds, which are government bonds issued in a foreign currency, such as the Republic of Argentina 7.5% bond that matures in April 2026.

Not only does this asset class outperform stocks on a risk-adjusted basis, it also boasts a low correlation with them. As a result, a portfolio that is diversified between equities and sovereign debt should incur even lower volatility than that of the two separate asset classes.

These are the implications of a new study entitled “Sovereign Bonds Since Waterloo,” which the National Bureau of Economic Research recently began circulating. Its authors are Christoph Trebesch and Josefin Meyer, both researchers at the Kiel Institute for the World Economy in Germany, and Carmen Reinhart, a professor of the international financial system at Harvard University’s John F. Kennedy School of Government.

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