Financial Times FT.com

Sophistication in managing risk is part of regime change

By Mohamed El-Erian

Published: July 26 2007 03:00 | Last updated: July 26 2007 03:00

An interesting decoupling phenomenon has been in play in global markets over the past few months - one that might offer important clues as to whether asset class diversification will continue to work well for long-term investors.

The decoupling that has attracted the most attention is the resilience of global equity valuations in the face of surging oil prices. This has offered the message that global demand can shrug off the higher cost of a raw material that features prominently in a broad range ofconsumer products.

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