The European Central Bank’s rate cuts and ‘quantitative easing’ have pushed the already low yields on European bonds even lower. Holders of cash are being penalized and over a third of government bonds now trade at negative yields. In March 2016 the European Central Bank announced further measures to stimulate the flow of credit to the corporate sector, including an extension of its bond buying programme to corporate bonds. In anticipation of this activity, investment grade credit spreads have compressed further. Investors no longer receive adequate compensation for spread-widening and illiquidity through bond yields and need to look for a greater diversity of returns as well as a more dynamic investment approach. As we pointed out in our Five-Year Capital Market Outlook, the risks of adverse market outcomes are increasing. We are recommending that investors review their approaches toward liability hedging, downside protection, greater alpha generation and diversification. With the prospect of historically low overall returns in mind, more efforts should be made to eliminate ‘dead assets’ (i.e. where investors are not being adequately paid for taking risks) and to reduce unnecessary costs.