AMP Ltd., one of Australia’s largest asset managers, has removed government bonds entirely from some of its retirement portfolios and cut allocations across others over the past six to 12 months, according to Chief Investment Officer Anna Shelley. The firm, which oversaw A$162 billion (roughly $112 billion) as of February, has shifted that capital toward corporate credit while building exposure to commodities and agriculture as alternative diversifiers. YourDailyAnalysis treats the specific wording of Shelley’s rationale as the real substance of the story: sovereign debt, in her framing, is no longer providing the diversification benefit that has anchored institutional portfolio construction for decades.
The stated logic is straightforward and not unique to AMP. “The main thing that we’ve done in recent times is to really reduce our weightings to government bonds,” Shelley said, attributing the move to a view that inflation will remain structurally elevated and that bonds are no longer reliably offsetting equity losses during volatile downturns. That second point is the more technically significant one: the entire case for holding government bonds in a balanced portfolio rests on negative or low correlation with stocks during selloffs, and AMP is explicitly stating that correlation has broken down in a way it no longer trusts.
The performance data lends the decision some immediate credibility, though one year is a short sample. Cutting government bond exposure helped finance overweight positions in global equities, contributing to an 11.3% return for AMP’s MySuper 1970s portfolio, one of its largest retirement funds, for the year through June 30. YourDailyAnalysis cautions against reading a single strong year as validation of a structural thesis – overweighting equities tends to look brilliant in a year when equities rally and painful in a year when they don’t, and 2026 so far has rewarded risk-taking broadly across most institutional portfolios, not just AMP’s.
AMP is not operating in isolation, which is the detail that elevates this from a single-firm decision to a sector-level trend. Australia’s sovereign wealth fund, the Future Fund, said back in 2024 it would lean on hedge funds rather than sovereign debt to offset equity risk. Colonial First State has similarly broadened its fixed-income allocations beyond government securities, with CIO Jonathan Armitage stating plainly that “traditional defensive assets aren’t actually acting defensively anymore” – a view he links directly to concerns about government budget deficits. CFS’s own growth-focused MySuper Lifestage 1975-79 fund returned 12.7% for the year through June, helped by exposure to private debt, catastrophe bonds and asset-based finance. YourDailyAnalysis reads the Future Fund, AMP and Colonial First State collectively as evidence that Australia’s largest institutional allocators have converged on the same conclusion roughly simultaneously, which is a stronger signal than any one firm’s standalone repositioning.
The uncomfortable question this raises is what happens during the next genuine equity selloff, precisely the scenario government bonds are supposed to hedge against. If elevated government-debt correlation with equities persists through a real drawdown – rather than just the relatively calm conditions of the past 12 months – funds that have shifted toward corporate credit, commodities, private debt and catastrophe bonds will be relying on a basket of alternative diversifiers that, collectively, has a much shorter track record through a systemic equity crisis than government bonds do. That untested scenario is the real risk in this repositioning, separate from whether the underlying inflation and deficit thesis driving it turns out to be correct.
Watch how these substitute diversifiers – corporate credit, commodities, catastrophe bonds, private debt – actually perform the next time equity markets have a sharp, sustained drawdown rather than a brief dip. Your Daily Analysis views that moment, whenever it arrives, as the real test of whether AMP, the Future Fund and Colonial First State have correctly identified a structural break in bond-equity correlation, or whether they have simply been rewarded for taking on more risk during an unusually favorable stretch for both stocks and credit.
