Every portfolio carries pain — the question is how much, how long, and whether it arrives alone or in company. That's the thesis driving Man Group portfolio manager Henry Neville's latest research1, a century-long sweep of cross-asset drawdown data that should sit squarely on every advisor's desk.
The setup is deceptively simple. Neville defines a drawdown as a decline of at least 50% of annualized volatility, measured daily across seven asset class proxies — equities (S&P 500), fixed income (rolling 10-year Treasury futures), gold, Trend, Value, Momentum, and Quality. The output is both granular and uncomfortable: a detailed anatomy of how each asset class bleeds, and crucially, how those bleeding episodes overlap.
Not All Drawdowns Are Created Equal
Equities, the asset most advisors are hired to manage around, are sharp but survivable. The average drawdown is steep — second only to gold in depth — but recovery is swift. Neville notes that equities are "unrivalled in terms of the speed of the recovery, at usually less than five months on average." The catch: volatility spikes from 15% in normal times to 24% in sell-offs. That nine-point spread, the widest in the study, is a warning flag. "Investors should be particularly wary of false dawns during red zones in their portfolio's equity beta."
Gold offers the opposite experience. Its drawdowns are slow, grinding affairs — averaging 1.5 years down and 1.3 years to recover, the slowest mean recovery in the analysis. Counterintuitively, gold is actually less volatile during drawdowns than outside them, 18% versus 20%, which Neville attributes to the asset's susceptibility to narrative and regime trading: "Some stories can last a long time."
Bonds, meanwhile, are in drawdown almost half the time by this methodology — not because they crash violently, but because they grind. The pattern fits: monetary tightening is well-telegraphed while loosening tends to surprise. Bonds are frequent filers, not catastrophic ones.
Momentum presents one of the more instructive contrasts. It spends less time in drawdown than any other asset — about 20% of history — but when it breaks, it breaks hard and fast. The worst single episode, a 63% collapse at the tail end of the Global Financial Crisis, exceeded even equity drawdowns in severity. Neville captures the dynamic with characteristic economy: "Watch someone go through a mid-life crisis; when a contrarian pivot comes, it is often fast and profound."
The Problem With Holding It All Together
The real analytical weight of the paper lies in how drawdowns interact. Neville charts the number of assets simultaneously in drawdown over the full overlapping period. The extremes are instructive at both ends. All seven in drawdown simultaneously? Never happened. Six simultaneously? Extremely rare — 0.6% of history — and four of the five instances cluster around large inflation accelerations, notably the 1970s and 2022. As Neville puts it dryly, "The Consumer Price Index getting out of hand can make even a free lunch costly."
On the other end, all seven in the clear at once? That's been true for roughly 4% of history. It has occurred in three sustained stretches: the mid-1980s following the defeat of inflation, the mid-1990s tech boom foothills, and — pointedly — right now. Neville's caution is measured but unmistakable: "Don't get too used to it, most of the time, something in your portfolio might not be working."
Where Diversification Helps — and Where It Doesn't
The conditional correlation analysis is where the paper earns its keep for practitioners. Quality and equities diverge sharply during each other's drawdowns — quality strategies tend to hold when markets are exuberant and in distress simultaneously, while equity-sensitive Value tends to track stocks down during equity sell-offs. Momentum and Trend move together in drawdowns, as both are continuation bets that suffer when macro regimes shift.
Gold sits at an unusual crossroads. It appears in both the best and worst three-asset combinations for drawdown overlap. The conclusion is pointed: "If you are going to hold it, be very thoughtful about what you combine it with." The pairing that stands out: Gold + Value + Quality. By Neville's reading, two-thirds of that combination remain attractively valued today.
Key Takeaways for Advisors
Neville closes with a scenario that lands harder than any data table: imagine two advisors comparing notes after "the AI bubble goes pop." Down 30% versus down 34% is the difference between a skip in your step and explaining yourself. The homework matters.
For advisors, the practical read-throughs are clear:
1. Equities recover fast, but volatility spikes during sell-offs. Don't rebalance into false dawns.
2. Bonds draw down frequently and quietly. Don't mistake low drama for low risk.
3. Gold is not a universal hedge. Its long, grinding drawdowns pair well with some assets and very badly with others — know which.
4. Trend strategies diversify equities in most scenarios, but share Momentum's worst moments at regime inflection points.
5. Inflation is the great drawdown synchronizer. When CPI accelerates, diversification benefits compress across nearly all asset classes simultaneously.
6. The current environment — with most assets out of drawdown simultaneously — is historically rare. That's not a signal to act, but it is a signal to plan.
The century of data Neville has assembled offers no guaranteed formula — he's candid that in any major crisis, "it's still very likely that it'll be an unpleasant experience, and we're just arguing about degrees." But degrees matter. They are what advisors are ultimately paid to manage.
Footnote:
1 “Don't Look Down: Reflections on Cross-Asset Drawdowns," Henry Neville, Man Group, May 2026. Data range: July 1926 – May 2026. Past performance is not indicative of future results.
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