Displaying items by tag: volatility

According to a recent survey released by professional services firm Ernst & Young, institutional investors are showing more confidence in alternative assets. The 2022 EY Global Alternative Fund Survey revealed that approximately 75% of institutional investors felt their alternative asset managers "met or exceeded performance expectations during a challenging and volatile market period, successfully protecting capital in down markets while positioning for long-term income generation." Private equity received the best feedback with 50% of institutional investors citing the outperformance of expectations of this asset class. This was followed by real estate strategies at 45% and real assets/infrastructure at 38%. While the majority of investors expected to keep their alternative asset allocations constant, investors that are expecting to make changes stated that "they will increase their allocations in the next three years." The survey also found that in response to rising demand, alternative fund managers are increasing their product offerings in areas such as illiquid credit, real estate, private equity, venture capital, and opportunistic or special situations.

Finsum:Based on the results of a recent Ernst & Young survey, institutional investors are showing more confidence in alternative strategies such as private equity and real estate. 

Published in Wealth Management

According to Pensions & Investments' annual survey of index managers, worldwide indexes managed in exchange-traded funds and exchange-traded notes have fared much better than index assets in other wrappers. Worldwide index assets managed in ETFs and ETNs totaled $6.51 trillion as of June 30th, down 4.8% from $6.84 trillion last year. Worldwide index assets overall fell 12.7% to $18.23 trillion. Exchange-traded products continued to see strong inflows despite headwinds such as inflation, rate hikes, and stock and bond losses. In fact, the global ETF industry saw its 40th straight month of net inflows during September and is on pace for annual net inflows that will be second to only last year's record of $1.29 trillion according to research and consultancy firm ETFGI LLP. Emily Foote McKinley, Head of Institutional Specialists for ETFs and Indexed Strategies at Invesco Ltd explained why ETFs continue to see strong inflows this year. She told Pensions & Investments, "I think that we've always seen the biggest pickups in institutional usage of ETFs around and after times of severe market volatility. That's because the ETF wrapper is able to prove itself as a provider of liquidity and access and transparency to underlying markets in times of crisis."

Finsum:ETFs continue to see massive inflows this year despite market volatility due to the wrapper’s ability to provide institutional investors with liquidity and transparency. 

Published in Wealth Management
Saturday, 19 November 2022 04:27

Home sweet home?

Seems volatility hunkered down with a good book in front of a roaring fireplace and felt well at home this month.

During October, implied volatility was unfailingly hovered well above average. In fact, it hit its highest monthly average since June 2020, according to gia.com. Down to the nitty gritty: half of the days parked beyond the first two weeks of the months experienced swings in the equity market of at least +/- 2%. Joining the party was an Oct. 13 intra-day move exceeding 5%. That unfolded before the gales of an advance in the midst of the months’ second half.

As for next year? Um, don’t ask. According to msn.com, with investors updating their economic outcome probabilities, UBS Global Wealth Management recently said investors should figure on even more volatility in the 2023 S&P.

"Large month-to-month swings could continue well into next year," said UBS.

In all probability, wide monthly S&P 500 swings will stretch in 2023. Why? Investors will watch moves by the Fed and economic data to ascertain the chances of a soft landing or recession in the U.S.

"[Expect] more volatility and large market swings exacerbated by positioning as investors update their economic outcome probabilities in reaction to each new data point and Fed utterance," Jason Draho, head of Asset Allocation Americas at UBS Global Wealth Management, in a note.

Published in Wealth Management
Wednesday, 16 November 2022 05:24

Proceed at own risk: Risky business?

Try active fixed management, which has an eye on managing the different risk characteristics of the fixed income market, according to madisoninvestments.com.

When these risks bubble to the top, the price tag on a bond might go kerplunk, potentially jeopardizing  interest payments down the line. The upshot: your portfolio could take a hit. Yeah; ouch. Meantime, common as they are, passive buy and hold strategies – or ETFs – have a history of missing the mark on addressing risks linked with fixed income.

On the radar of active fixed management is managing the various risk characteristics of the fixed income market. A portfolio can act in light of market conditions with active decision making within a portfolio.

Okay, so if you’re searching high and low for white knuckle thrills, fixed income investing might not be the Uber pickup you’re looking for. 

But…Isn’t there always one? The market volatility sparked by the aftermath of the COVID pandemic, bond specialists might want to hold on tight, according to benefitscanada.com.

“There’s more yield in the marketplace, so bonds are becoming a better competitor to stocks. . . . You should be asking yourself, how do I get more to my portfolio’s core allocation?” said Jeffrey Moore, portfolio manager in the fixed income division at Fidelity Investments, during the Canadian Investment Review‘s 2022 Risk Management Conference, the site continued. “I think there’s a whole bunch of ways.”

Published in Bonds: IG
Thursday, 10 November 2022 02:36

Complex Products Adding to Treasury Volatility

While income investors are certainly enjoying higher yields this year, the past decade had not been as kind. The low to flat interest rates over the past ten years may have helped propel the economy and markets since the financial crisis, but they also made it quite difficult for investors to find income. So, Wall Street firms got creative and created complex investment products that offered higher yields. But with rates rising this year, those same products are putting firms at risk, which is why they're jostling to hedge those positions by investing in derivatives that benefit from higher volatility in the market. However, those derivatives are making volatility in the US government bond market even worse. Treasuries were already experiencing massive swings as investors bought derivatives to lessen their bond risk, while dealers made long-volatility bets to hedge their own exposure. This combination led to a huge jump in the MOVE Index, which measures the implied volatility of Treasuries via options pricing. In October, the index breached 160, which is near the highest level since the financial crisis. With additional money betting on the ups and downs of bond yields, this is only going to add more fuel to the fire.

Finsum:As firms increase in their purchases of volatility-linked derivatives to hedge risk, the treasury market is expected to become even more volatile.

Published in Bonds: Treasuries
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