From Theory to Portfolio: How Asian Managers Are Rebuilding Diversification

For many Asian CIOs, the goal is not to revive a single “set-and-forget” mix but to re-establish diversification as a process. After a period when stocks and bonds rose and fell together, managers are rebuilding the core around high-quality government bonds and investment-grade credit, while treating duration as an active lever rather than a passive anchor. Asian USD investment-grade and local-currency bonds are getting renewed attention because of their historically lower volatility relative to global peers and their different drivers of return, which can reduce reliance on U.S. cycles.

Around that core, managers are widening the set of diversifiers. Real assets—gold, commodities, listed infrastructure and REITs—are being used to hedge inflation or policy shocks, while macro strategies and managed-futures-style exposures help when correlations compress across traditional assets. Some allocators are adopting a “barbell,” pairing quality equities and cash-flowing credit with selective alternatives such as private credit, where spreads and covenants may provide downside buffers, and with liquid downside protection that can be dialed up or down as conditions change.

Implementation has also become more granular and regional. Instead of one global equity sleeve, managers are separating Asia developed from emerging, applying factor tilts that reflect local market structure, and using currency both as a risk source and a hedge. The common thread is adaptability: re-testing correlations as macro narratives evolve, rotating the mix when signals shift, and measuring real-world drawdown behavior rather than relying on long-term averages that may no longer hold in today’s regime.