Welcome!

News Feed Item

Threat of Unexpected Inflation Could Negatively Affect Stocks and Bonds, according to Report from Mellon Capital

BNY Mellon Investment Manager Unveils Investment Program Aimed at Optimizing Tradeoffs Between Expected Returns, Portfolio Volatility and Unexpected Inflation

NEW YORK and LONDON, Nov. 7, 2012 /PRNewswire/ -- Unexpected inflation resulting from mounting debt burdens and easy monetary policy in developed nations could reduce the values of stocks and bonds, according to a report from  Mellon Capital Management Corporation, the San Francisco-based multi-asset manager for BNY Mellon.

"Since the onset of the financial crisis in 2008, both fiscal and monetary policies across the globe have been unprecedented," said Karsten Jeske, co-author of the report and senior research analyst at Mellon Capital.  "The U.S. especially has been troubled by persistently high deficits, with one trillion dollars added to its deficit each year since 2008."

In addressing this potential threat, Mellon Capital has unveiled a comprehensive program to help investors optimize the tradeoffs among expected returns, portfolio volatility and unexpected inflation.

The program is detailed in its report, Unexpected Inflation Hedging: A 3D SUPER Approach. The report distinguishes between expected inflation and unexpected inflation, which it defines as the difference between realized inflation and expected inflation for the same period.

"Past experience indicates that unexpected inflation is detrimental to both equity and nominal bond returns, while some other asset classes such as commodities and commodity-sensitive equities can help alleviate this risk," said Anjun Zhou, the other co-author of the report, and head of multi-asset research, of Mellon Capital.  "However, trying to anticipate unexpected inflation by moving into passive commodity indices would come at a cost, because these assets tend to have lower expected returns."

In its report, Mellon Capital extends the Modern Portfolio Theory by establishing a three-dimensional efficient frontier surface, which it uses to help determine the optimal trade-off among expected returns, portfolio volatility and unexpected inflation. The Mellon Capital programs are designed to move the efficient frontier upwards with the goal of providing improved unexpected inflation protection that would not have to reduce expected return, the report said.

Notes to Editors:

Founded in 1983 by innovators in the investment management field, Mellon Capital Management Corporation applies a disciplined and analytical approach to global investment management strategies. As of September 30, 2012, the firm had $258.9 billion in assets under management, including assets managed by dual officers of Mellon Capital Management Corporation, The Bank of New York Mellon and The Dreyfus Corporation, and $7 billion in overlay strategies. Additional information about Mellon Capital is available at www.mcm.com.  It is part of BNY Mellon Investment Management, one of the world's largest asset managers.

BNY Mellon Investment Management is one of the world's leading investment management organizations and one of the top U.S. wealth managers, with $1.4 trillion in assets under management. It encompasses BNY Mellon's affiliated investment management firms, wealth management services and global distribution companies. More information can be found at www.bnymellon.com.

BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, offering superior investment management and investment services through a worldwide client-focused team. It has $27.9 trillion in assets under custody and administration and $1.4 trillion in assets under management, services $11.6 trillion in outstanding debt and processes global payments averaging $1.4 trillion per day. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com or follow us on [email protected]

All information source BNY Mellon and Mellon Capital at September 30, 2012.  This press release is qualified for issuance in the UK and US and is for information purposes only. It does not constitute an offer or solicitation of securities or investment services or an endorsement thereof in any jurisdiction or in any circumstance in which such offer or solicitation is unlawful or not authorized. This press release is issued by BNY Mellon Investment Management (US) and BNY Mellon Asset Management International Limited (ex-US) to members of the financial press and media and the information contained herein should not be construed as investment advice. Past performance is not a guide to future performance.  The value of investments and the income from them is not guaranteed and can fall as well as rise due to stock market and currency movements.  When you sell your investment you may get back less than you originally invested. Registered office of BNY Mellon Asset Management International Limited: BNY Mellon Centre, 160 Queen Victoria Street, London, EC4V 4LA. Registered in England no. 1118580. Authorized and regulated by the Financial Services Authority. A BNY Mellon Company

SOURCE BNY Mellon

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
With the introduction of IoT and Smart Living in every aspect of our lives, one question has become relevant: What are the security implications? To answer this, first we have to look and explore the security models of the technologies that IoT is founded upon. In his session at @ThingsExpo, Nevi Kaja, a Research Engineer at Ford Motor Company, discussed some of the security challenges of the IoT infrastructure and related how these aspects impact Smart Living. The material was delivered interac...
The taxi industry never saw Uber coming. Startups are a threat to incumbents like never before, and a major enabler for startups is that they are instantly “cloud ready.” If innovation moves at the pace of IT, then your company is in trouble. Why? Because your data center will not keep up with frenetic pace AWS, Microsoft and Google are rolling out new capabilities. In his session at 20th Cloud Expo, Don Browning, VP of Cloud Architecture at Turner, posited that disruption is inevitable for comp...
Wooed by the promise of faster innovation, lower TCO, and greater agility, businesses of every shape and size have embraced the cloud at every layer of the IT stack – from apps to file sharing to infrastructure. The typical organization currently uses more than a dozen sanctioned cloud apps and will shift more than half of all workloads to the cloud by 2018. Such cloud investments have delivered measurable benefits. But they’ve also resulted in some unintended side-effects: complexity and risk. ...
It is ironic, but perhaps not unexpected, that many organizations who want the benefits of using an Agile approach to deliver software use a waterfall approach to adopting Agile practices: they form plans, they set milestones, and they measure progress by how many teams they have engaged. Old habits die hard, but like most waterfall software projects, most waterfall-style Agile adoption efforts fail to produce the results desired. The problem is that to get the results they want, they have to ch...
IoT solutions exploit operational data generated by Internet-connected smart “things” for the purpose of gaining operational insight and producing “better outcomes” (for example, create new business models, eliminate unscheduled maintenance, etc.). The explosive proliferation of IoT solutions will result in an exponential growth in the volume of IoT data, precipitating significant Information Governance issues: who owns the IoT data, what are the rights/duties of IoT solutions adopters towards t...
"We are a monitoring company. We work with Salesforce, BBC, and quite a few other big logos. We basically provide monitoring for them, structure for their cloud services and we fit into the DevOps world" explained David Gildeh, Co-founder and CEO of Outlyer, in this SYS-CON.tv interview at DevOps Summit at 20th Cloud Expo, held June 6-8, 2017, at the Javits Center in New York City, NY.
In 2014, Amazon announced a new form of compute called Lambda. We didn't know it at the time, but this represented a fundamental shift in what we expect from cloud computing. Now, all of the major cloud computing vendors want to take part in this disruptive technology. In his session at 20th Cloud Expo, Doug Vanderweide, an instructor at Linux Academy, discussed why major players like AWS, Microsoft Azure, IBM Bluemix, and Google Cloud Platform are all trying to sidestep VMs and containers wit...
"When we talk about cloud without compromise what we're talking about is that when people think about 'I need the flexibility of the cloud' - it's the ability to create applications and run them in a cloud environment that's far more flexible,” explained Matthew Finnie, CTO of Interoute, in this SYS-CON.tv interview at 20th Cloud Expo, held June 6-8, 2017, at the Javits Center in New York City, NY.
While DevOps most critically and famously fosters collaboration, communication, and integration through cultural change, culture is more of an output than an input. In order to actively drive cultural evolution, organizations must make substantial organizational and process changes, and adopt new technologies, to encourage a DevOps culture. Moderated by Andi Mann, panelists discussed how to balance these three pillars of DevOps, where to focus attention (and resources), where organizations might...
The Internet giants are fully embracing AI. All the services they offer to their customers are aimed at drawing a map of the world with the data they get. The AIs from these companies are used to build disruptive approaches that cannot be used by established enterprises, which are threatened by these disruptions. However, most leaders underestimate the effect this will have on their businesses. In his session at 21st Cloud Expo, Rene Buest, Director Market Research & Technology Evangelism at Ara...
No hype cycles or predictions of zillions of things here. IoT is big. You get it. You know your business and have great ideas for a business transformation strategy. What comes next? Time to make it happen. In his session at @ThingsExpo, Jay Mason, Associate Partner at M&S Consulting, presented a step-by-step plan to develop your technology implementation strategy. He discussed the evaluation of communication standards and IoT messaging protocols, data analytics considerations, edge-to-cloud tec...
New competitors, disruptive technologies, and growing expectations are pushing every business to both adopt and deliver new digital services. This ‘Digital Transformation’ demands rapid delivery and continuous iteration of new competitive services via multiple channels, which in turn demands new service delivery techniques – including DevOps. In this power panel at @DevOpsSummit 20th Cloud Expo, moderated by DevOps Conference Co-Chair Andi Mann, panelists examined how DevOps helps to meet the de...
When growing capacity and power in the data center, the architectural trade-offs between server scale-up vs. scale-out continue to be debated. Both approaches are valid: scale-out adds multiple, smaller servers running in a distributed computing model, while scale-up adds fewer, more powerful servers that are capable of running larger workloads. It’s worth noting that there are additional, unique advantages that scale-up architectures offer. One big advantage is large memory and compute capacity...
In the world of DevOps there are ‘known good practices’ – aka ‘patterns’ – and ‘known bad practices’ – aka ‘anti-patterns.' Many of these patterns and anti-patterns have been developed from real world experience, especially by the early adopters of DevOps theory; but many are more feasible in theory than in practice, especially for more recent entrants to the DevOps scene. In this power panel at @DevOpsSummit at 18th Cloud Expo, moderated by DevOps Conference Chair Andi Mann, panelists discussed...
After more than five years of DevOps, definitions are evolving, boundaries are expanding, ‘unicorns’ are no longer rare, enterprises are on board, and pundits are moving on. Can we now look at an evolution of DevOps? Should we? Is the foundation of DevOps ‘done’, or is there still too much left to do? What is mature, and what is still missing? What does the next 5 years of DevOps look like? In this Power Panel at DevOps Summit, moderated by DevOps Summit Conference Chair Andi Mann, panelists loo...