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Alternative Market Briefing

Use of risk premia in portfolio construction can help achieve more efficient returns

Friday, October 03, 2014

amb
Antoine Haddad
Benedicte Gravrand, Opalesque Geneva:

Several fund managers discussed the ins and outs of risk premia, smart beta and risk parity in systematic trading strategies during Opalesque’s most recent Roundtable.

"It is no secret that the extremely low volatility environment of the recent past has not been extremely supportive for the "trading-skill" alpha that we tend to look for," said Antoine Haddad, Founder and CIO of Bainbridge Partners, a wealth management company based in London, during the recent Opalesque London Roundtable. However, he continues, volatility in equity and foreign exchange markets cannot remain near their 15-year lows. The imminent expansion in volatility will help short-term directional traders improve their returns and increase the appetite of long-biased investors for more defensive or neutral strategies.

Risk premia building blocks His firm is currently re-allocating assets by hiring portfolio managers to run those alpha strategies in-house. This is because, he says, investors transparency levels that funds of funds cannot provide. They are also launching, in partnership with CBP-Quilvest, two UCITS funds, which will be long-biased and rely on risk premia building blocks to diversify their exposure.

Risk premium is the return in excess of the risk-f......................

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