Not exact matches
If
done correctly, with an eye not to achieving political or regulatory objectives but rather to eliminating financial distress costs, these can improve the enterprise value of the borrower; to the extent that the lender participates in the upside (and if the performances of the various equity positons emerging from these swaps are
uncorrelated), the lender's net
asset position can also improve.
The idea is if you mix enough
asset classes together that are all
doing different things, and as we say in the business,
uncorrelated, you get a better result, more diversification and a way to grow your money in a safer way.
If that means buying bonds, moving to cash, going short, abandoning your home market, buying unusual,
uncorrelated or even negatively correlated
assets, whatever — well, ideally, that's exactly what they'll
do.
An alternative approach that rebalances many
uncorrelated asset classes, each with returns equivalent to the S&P 500, strains to
do better than 4.5 %.
Invest in volatile
uncorrelated assets that cover every economic condition, and you'll
do pretty well with limited downside no matter what happens in the markets.
The authors
do an admirable job of explaining the benefits of diversifying across
uncorrelated asset classes, which is a core principle of the Couch Potato strategy.