Tue, Sep 19, 2017
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications

The Golden Years are over - how to deal with volatility and crowdedness: Opalesque Roundtable

Sign up here for our free Roundtable Scripts - get this unique intelligence by email as Opalesque publishes them:

Asset allocators have had some golden years behind them. Fixed income and equities had negative correlations to each other, so blending them together gave low volatility in client portfolios. Both asset classes had great returns in 2013 and 2014. Now correlations are moving up. The first hint of that was in May-June 2013, with the Fed tapering, and again last April when yields started to rise in Europe.

When looking back at the years 2008 and 2011, years when markets were down by more than average, those were years alternative funds had to demonstrate their value added. Looking at 2015, this could be another one of those years. Everything started quite well, but most indices have now given up their yearly gain and gone into negative territory.

The Volatility Dilemma

Summer 2015 can potentially be seen as the first hiccup caused by rising rates. Clearers and exchanges like volatile markets as this brings more transaction opportunities for traders and investors, and volumes can double. But if volatility becomes too high, like in August, it becomes challenging for almost all investors and managers. Going into a month like that being completely long volatility is also difficult and very costly. Still, for a volatility fund like Mint Tower, August 2015 was a “textbook” month and the fund made money. But in general, most alternative managers should be able to outperform in years like this...

How to recognize a crowded trade

...Provided they don't get stuck with the crowd. The risk for crowdedness in markets has gone up a lot. Some of the trades that look obvious for people to take positions in become very quickly crowded, and crowded positions are actually the worst to be in, in highly volatile times, because they get unwound the fastest. So typically in areas where most of the market focuses on at such a point of time, you can also suffer the biggest pullbacks. This can be a very dangerous dynamic: things that are in the news attract so much attention, and so much positioning and very quick trading, and this can make the market more treacherous. Read on to learn how Gerlof de Vrij from Blenheim Capital tries to identify a crowded trade.

Can risk management make markets riskier?

Everything with a high yield, high carry, high roll-down, and low volatility, can turn out to be a minefield for investors, despite the “low” risk. The Swiss Franc and then the Chinese yuan were examples where people assume they can count on a presumed base or risk level, but then that suddenly breaks. And because those people had scaled their positions on short-term, historic volatility measures, they often get completely burned. Read on to learn what successful managers do instead.

The Opalesque 2015 Netherlands Roundtable was sponsored by ABN AMRO Clearing and Eurex, and took place September in Amsterdam with:

  1. Gerlof de Vrij, CEO/CIO, Blenheim Capital Management BV
  2. Jelte de Boer, Portfolio Manager, Optimix
  3. Willem de Vlugt, Partner, EValuation Capital Management
  4. Wilrik Sinia, Partner, Mint Tower Capital Management
  5. Gildas LeTreut, Head of Prime Services, ABN AMRO Clearing
  6. Cornelius Müller, Institutional Sales, Eurex / Deutsche Börse
The group also discussed:
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. Public quant funds aren't always what they seem[more]

    From Bloomberg.com: Quantitative equity strategies are a fast-growing retail product. There is more than $150 billion in quant equity public mutual funds, and such ETFs are on track to top $1 trillion this year. Unfortunately, there's little agreement on what these funds are. The two most common def

  2. Institutions - Canada's pension funds lever up[more]

    From Institutionalinvestor.com: Canadian pension plans are among the most admired institutional investors for their prowess as money managers. Now pension plans in Canada are upping the ante, increasingly issuing long-term bonds and using the borrowed money, or leverage, to try a

  3. Manager Profile - The three quants in their 20s running a hedge fund making $1 billion of trades daily[more]

    From Forbes.com: In an office overlooking downtown Boston, the views are partially obscured by math formulas and technical drawings that have been scribbled on the windows. Wearing a T-shirt with the words "machine earning" printed on it, Luca Lin says the formulas are being developed to help trade

  4. News Briefs - Iron Cove Partners launches hedge fund manuscript management & professional liability insurance policy, Private equity, hedge funds eye bizav financing market. Blue Capital halts ILS fund buy-backs as hurricane Irma approaches[more]

    Iron Cove Partners launches hedge fund manuscript management & professional liability insurance policy Iron Cove Partners, a national insurance brokerage specializing in the needs of the alternative asset management community, today announced the launch of its newest insurance product, th

  5. Asia - Hedge funds used to love shorting China. Now, not so much, Fledgling China FoFs require careful use: NCSSF, Amac, Japanese banks turn to PE, hedge funds for returns[more]

    Hedge funds used to love shorting China. Now, not so much From Bloomberg.com: A sharp devaluation. A credit crisis. And an economic hard landing. That's what some of the biggest names in the hedge fund industry were predicting for China after the nation's stocks and currency tumbled in 2

Click here for More about Opalesque Tracking
- A new, unique Premium Service -
  1. emerging managers
  2. "hedge fund launch"
  3. Hedge Fund Launch
  4. King Street
  5. saemor
  1. standard pacific
  2. ids capital
  3. fund manager
  4. Moore Emerging Markets
  5. managed account