Sun, May 1, 2016
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Greek default and deleveraging of greater concern than inflation says RWC Partners

Tuesday, May 17, 2011
Opalesque Industry Update - RWC Partners’ Head of Absolute Return Bond Strategies, Peter Allwright, believes that investors should be far more concerned about the effects of the “re-profiling” of Greek debt than the inflation numbers.

Although UK inflation has again surprised on the upside the consequences for economic growth from the unwinding of key European countries will have much greater consequences than inflation. Allwright highlights government bonds as the only asset class that are visibly pricing in default risk against Greece. This leaves other risk assets significantly exposed should Greece restructure its debt. Spain, Portugal and Ireland would also be clearly vulnerable to default, a situation that would certainly lead to further deleveraging.

Allwright is particularly focused on the deleveraging impact of Greece as European banks are forced to write down the value of Sovereign debt causing them to reign in lending. Although it is not his core scenario Allwright believes that investors are understandably focused on inflation however they should be aware of the possible deflationary impact of a European sovereign debt re-pricing.

Within their portfolios Allwright and his co-Head Stuart Frost remain liquid and flexible to ensure they can protect capital and make money as the situation develops. Their funds have a flexible mandate that allows Allwright and Frost to position their portfolios to make money even in periods of extreme stress such as sovereign debt crises.

Commenting, Peter Allwright, Head of Absolute Return Bond Strategies at RWC Partners, said:

“Of most concern to me is that investors are too complacent about the risk of contagion and default in the European bond markets. The fact that government bonds are clearly pricing in default and re-profiling to a greater extent than any other asset means someone is wrong and is going to get burnt.

“Our concern is that market performance in 2011 may start to resemble that of 2008 where an initial inflation spike was followed by a sustained period of risk aversion and accelerated deleveraging.

“Our job is to remain liquid and to make our investors returns whatever is happening in the financial markets. We remain aware of the risk of prolonged inflation but equally are aware that the sovereign issues in Europe could accelerate the post-Lehman deleveraging.”

Allwright and Frost joined RWC Partners in October 2010 from Threadneedle where they were the joint portfolio managers of the Threadneedle Target Return Fund, Absolute Return Bond Fund and the hedge fund, Macro Crescendo Trading Fund.

Allwright and Frost’s approach involves core allocations to short duration, high-grade fixed income securities, supplemented by alpha strategies that take advantage of investment opportunities in the fixed income and currency markets. These alpha strategies are able to take long and short duration positions in the bond markets allowing the overall strategy to make positive returns through the market cycle, including periods of financial stress and uncertainty.

The RWC Enhanced ARC Fund and the RWC Cautious ARC Funds are UCITS III funds with daily dealing aiming for returns of cash +6% and cash +3% respectively.

(press release)

About RWC Partners
RWC Partners is an independent investment firm founded in 2000. The group provides high-alpha asset management to institutions, professional investors and intermediaries. RWC manages a range of UCITS III funds as well as offshore funds and institutional mandates.

The business is built around highly-talented portfolio managers with an intense focus on performance and a strong risk management culture. RWC Partners is independently managed and controlled. The majority of the firm’s equity is owned by portfolio managers, directors and other employees. Schroders own minority stake in RWC Partners.

RWC's investment teams comprise many of the asset management industry’s most respected names in long only and absolute return investing.

RWC's seven investment teams include:

Nick Purves and Ian Lance - Equity Income and Value
Ajay Gambhir - European Equities
Priya Kodeeswaran - Global Growth Equities
Mike Corcell - US Equities
John Innes - UK Equities
Davide Basile - Global Convertible Bonds
Peter Allwright and Stuart Frost - Absolute Return Bond & Currencies

For further information, visit RWC Partners at www.rwcpartners.com

- FG

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Hedge funds see $14.3bn outflows in Q1, CTAs and multi-strategy lead net inflows[more]

    Komfie Manalo, Opalesque Asia: The hedge fund industry saw net outflows of investor capital in the first quarter of the year, totaling $14.3bn, data from Preqin showed. This continues from the $8.9bn overall net outflows that funds recorded in Q4

  2. Third Point calls Q1 "catastrophic" for hedge funds[more]

    Bailey McCann, Opalesque New York: The first quarter of this year was rocky for hedge funds based on aggregate performance from the industry, but now we are beginning to hear what the managers thought of it as quarterly letters make their way to investors. Dan Loeb, CEO of New York-based $17 bill

  3. Asia - Stabilization of China's capital outflows may hinge on Janet Yellen, Fink says China to do well this year as bubble threat postponed, Chinese hedge fund to invest in India’s infrastructure[more]

    Stabilization of China's capital outflows may hinge on Janet Yellen From Bloomberg.com: Whether China’s recent stabilization of its currency and capital outflows continues -- or downside pressure reignites -- may hinge in large part on Janet Yellen. If the Federal Reserve chair sticks to

  4. …And Finally - After all, judges are human too[more]

    From Newsoftheweird.com: In March, one District of Columbia government administrative law judge was charged with misdemeanor assault on another. Judge Sharon Goodie said she wanted to give Judge Joan Davenport some files, but Davenport, in her office, would not answer the door. Goodie said once the

  5. Comment - Unmasking the men behind Zero Hedge, Wall Street's renegade blog[more]

    From Bloomberg.com: Colin Lokey, also known as "Tyler Durden," is breaking the first rule of Fight Club: You do not talk about Fight Club. He’s also breaking the second rule of Fight Club. (See the first rule.) After more than a year writing for the financial website Zero Hedge under the n