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Investors who are concerned about inflation should focus on increasing their exposure to asset classes that provide a positive beta to changes in inflation.
Macroeconomic variables are important drivers of investable risk factors’ returns, which in turn are the underlying components of asset class returns.
We believe plan sponsors should consider allocating their risk asset portfolios in a way that explicitly integrates liabilities, consistent with the approach they use to build their bond portfolio.
Oil exposure can increase equity beta in an investment portfolio.