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Alternative Market Briefing

Understanding the Great Rotation, Part 3

Friday, November 15, 2013

amb
Alexander Ineichen
Benedicte Gravrand, Opalesque Geneva:

This series of articles explores the concept of the Great Rotation, which was anticipated to be one of 2013’s themes, its reality and how it is viewed. Here we see that it is not just about investors rotating out of bonds and into equities.

Part 1 was in Wednesday’s AMB, Part 2 in Thursday’s. Part 4 will be published on Monday (Nov. 18th).

Two opposing rotations playing out simultaneously

Morgan Stanley’s latest blue paper, out last month and called "Great Rotation? Probably not," says rotational flows from bonds to equities will be more subdued than many expect.

"Our bottom-up analysis of $89 trillion of global AuM [about 60% is institutional money and 40% retail] suggests there are major structural headwinds to the 'Great Rotation’ story," the paper says, which adds that the concept of a 'Great Rotation’ simplifies nuanced demand dynamics at play.

Indeed, the authors think two opposing rotations may be playing out simultaneously: institutional investors are de-risking while retail investors are re-risking.

Since January this year, retail and HNW investors have reduced cash and increased r......................

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