It's time to buy actively managed funds, instead of index funds, as assets that long walked in lockstep are set to move to a different drum, BNP Paribas said last week.
Over the past few years, assets had a single driver – central bank policy stimulus – and that meant that actively managed funds, which have higher expenses, underperformed funds that passively track indexes, noted Mirza Baig, head of foreign-exchange and rates strategy for Asia at BNP Paribas.
"All you had to do was basically buy something and sit on it," he noted, but added that now, that correlation was breaking down.
As an example, he pointed to the long-running negative correlation between the dollar and commodity prices, or that commodity prices historically usually fall as the dollar rises and vice versa. But over the past few weeks, he noted, oil prices have moved higher even as the U.S. dollar has jumped.
Baig said that's a signal that assets globally are ceasing to move in tandem.
"Everything is going to have its own story," he said. "We're not going to see perfect correlation between bond rates, equity and credit markets. We're likely to see much more idiosyncratic movements in specific asset classes."
He pointed to several reasons for the paradigm shift.