Alternative risk premia are encountering growing interest from investors. They mimic strategies formerly available through investment in hedge fund vehicles but with more favourable liquidity and cost characteristics.
In this paper, we investigate the question of the allocation across a range of cross-asset alternative risk premia. For this, we design an active macro risk-based framework that aims to exploit varying behaviour in different macro regimes. We then build long-term strategic portfolios across economic regimes, which we dynamically tilt based on point-in-time signals related to regimes nowcasting and current carry. Finally, we perform backtests of the allocation strategy.
Innovation in financial technology has unleashed a digital vortex that promises to transform the asset management value chain, from asset gathering through to investment and operations. We believe this digital vortex offers numerous potential opportunities for asset managers, but it also carries risks. If financial assets are managed by machines which interpret signals in the same way and recommend the same passive investments, how can we avoid crowded trades and the risk of a market stampede? This is where talented humans with forward-looking views will differentiate themselves.
We believe financial technology is best seen as a tool to empower asset managers and benefit clients. Just as athletes use game tapes and data analytics to fine-tune their performance, we envisage a future where new technology allows market participants to undertake accurate and structured analysis to deliver a better outcome to clients. Nevertheless, we are convinced that technology cannot be deterministic. Humans will still be the ones to give it purpose and take the key decisions.
In this short paper we share our thoughts on the direction the industry should take to transcend disruption, and give some examples of how Unigestion is using digital innovation to evolve the way we invest, to the benefit of our clients.
By Fiona Frick, Unigestion CEO
-The stars have aligned for faster growth and higher inflation
-Yet low levels of market stress probably don’t reflect the actual risks
-We have tempered our position towards growth assets in the short term
No surprise, but a new normal
The first round of the French elections can be read in two ways. First, there was no surprise. Indeed, the two winners have led the polls since January. A closer look at the details, however, shows something more profound.
As we approach the first round of the French presidential elections on 23rd April, the uncertainty over who will make it into round two, and the final result, has never been greater.
While a moderate candidate is the most likely victor in our assessment, the situation remains fluid with little risk priced in. In such an environment, we believe it is important to protect investors in our multi asset portfolios from market shocks. We have tactically reduced exposure to financial markets and increased exposure to the Japanese yen for its defensive qualities in times of stress.