The recent risk-off retreat that sent U.S. equities markets plunging is an example of why Treasury bond exchange traded funds still have a place in investors’ portfolios.

On Friday, the Vanguard Intermediate-Term Treasury Index Fund ETF Shares (VGIT) was up 0.8% and the Vanguard Long-Term Treasury Index Fund ETF Shares (VGLT) rose 2.33%. Meanwhile, broad U.S. benchmarks declined 2.5% to 3.5%.

While some have argued that bonds are no longer a good diversifier in a near-zero interest rate environment with higher market correlation across asset classes, the recent risk-off event reflects the ongoing need for safe-haven assets to stabilize a well rounded portfolio.

“It reveals that Treasuries still provide very good cross asset hedging,” Michael Purves, founder of Tallbacken Capital Advisors, said in a note, according to Bloomberg. “When there is a macro shock, the bid can be ferocious – strong inflation not withstanding.”

While Treasuries pulled back on Monday, trading amid the resurgence in risk assets, and with the yield on the 10-year benchmark retracing about half its Friday move, many pointed out that the asset class remains a bulwark in a balanced portfolio strategy.

For instance, in a recent study, Ardea Investment Management researcher Laura Ryan stress-tested investment strategies across economic regimes and found that over the decades, balanced portfolios allocating 40% to fixed income and 60% to shares exhibit lower portfolio volatility compared to those overweight risk assets, providing improved risk-adjusted returns over the long term.

“The consensus now seems to be that government bonds are not doing their job,” Ryan told Bloomberg, adding that her research helps inform strategies for the specialist fixed income manager that targets low-volatility returns. “That argument fails to consider the relative importance of bonds in reducing overall portfolio volatility.”

According to Ryan’s research, if an an investor were only long on equities, portfolio volatility would be at 24.6%. In comparison, with 40% bonds, the portfolio volatility dipped to 14.2% in recent years. Consequently, the researcher advised clients to keep bonds as a portfolio diversifier.

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