• Which hedge assets have worked in the current crisis? The answer is that the list has been reduced considerably.
• We take the point of view of a euro-based investor and compare long-term asset class correlations to the “stress correlations” observable in the 2008-09 crisis and in the present crisis.
• Data for the present crisis are still limited. But if the current pattern remains unchanged, it suggests a much reduced ability of many hedge assets to deliver short-term protection.
• A suspension of hedge assets implies a greater overall risk for balanced portfolios. Illiquid assets modify portfolio risk, but they do not obviously reduce it.
• The absence of credible hedge assets renders a static approach to managing portfolio risk less reliable. Risk must be managed directly in the risk asset part of the portfolio, with a dynamic approach.