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Alternative Market Briefing

Some ways to handle risk in current macro environment

Friday, December 21, 2012

Benedicte Gravrand, Opalesque Geneva:

There are many ways to deal with risk and tail-risk. But in the current environment, one must be even more creative. Participants at the recent Opalesque Geneva Roundtable discussed some of their risk management methods, such as the use of derivative-driven insurance strategies, beta management, approved tail-risk managers and overlay programs, a benchmark-agnostic approach, a larger allocation to sovereign bonds, stress risk measures, and segregated accounts.

Tail-risk is on both sides of the distribution in the current macro environment, said Gregoire Haenni, CIO of the CERN Pension Fund. On the one hand, there are stimulus programs going on in developed markets, and on the other, those same markets are facing fiscal tightening. Growth figures early next year will be disappointing and equities market could drop too. He believes that credit strategies may do well if they’re well dynamically managed as well as risk managed. For tail risk protection at CERN, he added, "we implemented ourselves some mainly derivative-driven insurance strategies. But, we also actively manage the beta of the portfolio."

Mercer has a list of approved tail-risk managers and overlay programs which they implement with various institutions, Dominique Grandchamp, Senior Investment Consultant at Mercer, told the participants. But tail-risk programs do not address the r......................

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