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Alternative Market Briefing

Investors face the challenges of uncertainty

Monday, February 03, 2014

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Alexander Ineichen
Komfie Manalo, Opalesque Asia:

The relationship between bonds and alternative investments is like history repeating itself, said Alexander Ineichen of Ineichen Research & Management AG at the latest Opalesque Roundtable in Zurich. He said that in the late 1990s and early 2000s, there was a move from equities to alternatives; now it’s a move from bonds to alternatives. Overvalued equity markets put hedge funds on the map of the institutional investor 12-14 years ago. Currently it is overvalued bond markets that can explain the search for alternatives.

When asked about the latest trend and development in alternative investments, Ineihen said, "The common wisdom prior and at the peak was that "equities are for the long-run" and that they outperform bonds in the long run. As long-term investor, one could therefore have a large equity allocation because one could sit through large drawdowns. Many non-English speaking Continental European institutional investors, for example, started to move away from their traditional bond-heavy portfolios and piled into equities close to the peak. So when we hear more and more institutional investors claiming that asset-liability management, ALM for short, is the pinnacle of institutional investor’s wisdom, it somehow has a déja vu ring to it. We’ve seen an institutional infatuation with benchmarks before."......................

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