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Alternative Market Briefing

Risk, correlations continue decline except for China, Japan - Axioma

Tuesday, April 30, 2013

Bailey McCann, Opalesque New York: Risk declined in the first quarter of 2013, the fifth consecutive quarter in which overall risk levels slid lower, according to Axioma Insight: Quarterly Risk Review, a report on the state of risk in publicly traded equity markets around the globe. Axioma is a global firm providing risk management solutions provider to global financial institutions including asset managers, hedge funds, pension funds and investment banks. According to the report, despite geopolitical concerns such as new elections, Cyprus, and sequestration in the US markets continued to be relatively strong and risk levels continued their steady decline.

Asset-asset correlations fell to five-plus year lows in most markets during the quarter, driving a continued decrease in top-line risk. "Once again, we detected no definitive undercurrents pointing to an imminent reversal of the current risk regime," said Melissa Brown, CFA, Senior Director, Applied Research and co-author of the Quarterly Risk Review in a statement.

"Not only were the assets within markets much more differentiated, but the markets themselves appeared to be slightly less correlated," said Brown. "From a risk perspective, the current investment landscape is substantially different from the crisis-driven markets that resulted from the global and European financial crises. With markets no longer in lockstep, equity investment managers and asse......................

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