News category: Opinion

Owning volatility as a tail risk hedge has its advantages when the market experiences a chaotic bout of volatility. But more often than not it is met with concern and criticism about its steep cost in normal-to-muted markets. 36 South’s Neale Jackson writes an exclusive op-ed about how investors can offset that decay and make the most out of owning volatility in an interest-rate driven environment.

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Attempting to answer the questions from non-attendees about what the hot-button issues were at Europe EQD this year, I realized less had perhaps changed since 2022 than I originally thought. But since I’m still being asked about the top talking points, here’s my stab at listing the salient topics, along with some pictures and other notebook items to share with those of you who couldn’t be there.

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The world is entering a recessionary period, driven by inflation of the sort we haven’t seen for decades. Lots of that inflation was due to the splurge in goods spending during the lockdowns. I don’t know about you, but I now have a closer relationship with my delivery driver than some of my own family.

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There was a time when these pages were filled with features on alternative risk premia. We wrote thousands of words about risk premia construction, implementation and backtesting. We wrote about benchmarking, tilting and timing, about bank-structured ARP and actively-managed risk premia. And of course, we wrote about the holy grail: the all-weather risk premia portfolio.

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Corporate responsibility is nowadays an integral part of the core activities of an institutional investor. The traditional method of implementing responsibility into the investment process has been negative screening, for example the exclusion of the non-responsible companies. Kari Vatanen, chief investment officer at Veritas Pension Insurance Company in Helsinki, discusses how the war in Ukraine has changed investors’ attitudes towards blacklists as a tool of responsible investing.

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Are family offices the largest remaining non-derivatives-using holdout? For a long time the U.S. retail and high-net-worth sector was a missing piece of the business puzzle for derivatives sales desks, but, as we cover in this quarter’s magazine, that sector no longer lags so far behind its equivalent in Europe or Asia. One topic that did come up when reporting on it, however, was how difficult it is to sell derivative-based products to family offices.

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Kari Vatanen, chief investment officer at Veritas Pension Insurance in Helsinki, thinks cryptocurrencies could be used as trading instruments in institutional investors’ portfolios.

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In a conversation with EQDerivatives, Matthew Yeates, head of alternatives and quantitative strategy at 7IM in London, shared his perspective on the demise of the 60/40 portfolio and highlighted where he is seeing opportunities. “In certain circles the death of the 60/40 portfolio is almost becoming consensual. However, it seemed like there were two sides

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The 60/40 portfolio has been declared dead several times over in recent decades but is it for real, this time? Institutional investors are notoriously slow-moving and change-averse. But it’s also hard not to read through the presentations of their consultants and asset managers and wonder whether many trustees were actually being offered anything much different

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EQDerivatives is preparing its third annual report on the alternative risk premia market and is seeking asset managers and allocators to fill out a questionnaire that will provide the data for the detailed market mapping project. Both firms implementing alternative risk premia strategies and those who have not entered the market are encouraged to participate.

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