Investors view all political events (decisions that can significantly change expected returns in a particular economy) as political risks. There is a broad spectrum of specific risks including outright conflict between nations, civil war, terrorism, unsupportable populist economic policies, and—last but not least—unsustainable minority governments. Frequently, these risks are divided…
The current concern amidst investors and central bankers is that we are creating a new risk bubble. Complacency in markets has been linked to the success of easy money policy globally indriving up asset prices and slowly lifting growth. The stability of the world economy in 2017 hasbeen a standout…
Foreign Exchange in 2016 has seen a roller coaster of risk, from the depths of China despair in January to the worst-case scenario outcome of Brexit in June, but as we grind towards the end of the year, we have been seeing some of the lowest volumes and lowest implied…
The advent of negative rates was assumed to be a short-lived phenomenon, like an outbreak of a contagious disease, horrible but not lasting. During the crisis of 2008-2009, negative rates did their work and were quickly undone. However, since 2015, this has proved to be less successful in stamping out…
The problem for international portfolio managers is simple—to hedge or not to hedge foreign exchange risk. Often, it’s a binary decision whether to hedge 0% or 100%. Like Hamlet, many managers wring their hands and fret over that decision. There are too many factors, too little information, and the hope…
There are a number of lessons to be learned from 2014 price action across markets. Three dramatic moves stand out especially — JPY, RUB and Oil. Other asset classes began to reflect on these moves and the correlations across markets shifted, sometimes dramatically. From October 15, overall risk markets have…
US ending QE policy will change the environment for Systematic vs. Discretionary traders as cash and volatility become more important. Size of Quant Funds >$100mn but <$1bn appears to be optimal for returns. Risk management stands out a key factor for determining success. Market environment and leverage are the main…
Reducing volatility in a portfolio is more than a smoothing exercise. People in the post-2008 world want security and sustainability. Big rallies in equities over the last 3 years have produced more doubt than satisfaction. The drivers of asset allocation, security selection, and market timing are usually the fundamental tools…
