Reading Time: 3 minutesThe Highway Code is full of great advice, designed to keep us safe on the roads, what is less well-known is that it also contains some very helpful advice on investment strategy, take for example sub-paragraph 146 of General Rules, Techniques and Advice for all drivers :  146 Adapt your driving to the appropriate type and … More What does The Highway Code say about investment strategy ?

Reading Time: 5 minutesRecent research by Deutsche Bank helps pension funds understand differences between the models commonly used by asset managers and advisors to allocate their assets Deutsche Bank (DB) recently published a substantial piece of work analysing different approaches to portfolio construction which makes a useful contribution to the existing material available on the issue. http://pull.db-gmresearch.com/cgi-bin/pull/DocPull/64-FF1A/74067871/0900b8c086a8e89a.pdf As … More What does diversification mean to you ?

Reading Time: 4 minutesA version of this article subsequently appeared in the July 2013 of Outlines on page 6 UK Pension funds and inflation UK defined-benefit pension funds tend to have liabilities linked to inflation, due to the contractual revaluation of benefit payments for active and deferred members each year, and the annual increases granted on pensions in … More Inflation risk – mind the cap (and floor)

Reading Time: 6 minutesIt’s a question that’s been on my mind for a few weeks. Ever since the gold price saw moves which amounted to experiencing an entire year’s worth of volatility in a single day, I’ve been wondering whether such an asset deserves a place in the portfolio of a long term investor seeking diversified sources of … More Does Gold belong in an institutional investor’s portfolio ?

Reading Time: 4 minutesA lot of the criticisms of Risk Parity that I come across share similar themes, some of which are based on misunderstandings of what most Risk Parity providers actually do. These FAQ are designed to address some of the more common themes that we see and hear in the industry press 1.       Is Risk Parity … More Six FAQ On Risk Parity

Reading Time: 3 minutesSeveral long term studies have presented compelling evidence, and fundamental reasoning, that trend following is an investing approach that delivers good risk adjusted returns. First up is AQR’s A Century of Trend Following Investing, where the authors present evidence to show that a combination of relatively simple trend strategies operating over 1, 3 and 12 … More The trend is my friend (again): business as usual after “wrong type of volatility”

Reading Time: < 1 minuteNo great surprise given the recent events in Cyprus, but as we can see from the chart below VSTOXX continues to trade at a higher level than the VIX or VFTSE volatility indices, continuing a trend that’s been evident since late 2011. (click to enlarge) In particular the Cyprus situation has seen the VSTOXX index … More Equity Market VolRadar : VSTOXX Trading At a Premium to VIX

Reading Time: 4 minutesthis blog first appeared in March 2013, the original text is below subsequent updates : Pricing update, September 2013 We have recently executed, on behalf of one of Redington’s largest pension fund clients, a volatility controlled equity benchmark with a put option giving protection on the downside beyond -10%, over one year. the pricing obtained … More Why risk control can reduce the cost of downside protection by 80%

Reading Time: 3 minutesReflecting on an interesting few days at the NAPF Investment conference in Edinburgh this week, I thought there were a couple of interesting observations relating to equities and volatility. The equity return distribution is flattening, and tails widening Professor Paul Marsh was the first to make this observation on the first day of the conference, … More Reflecting on the Edinburgh NAPF

Reading Time: 2 minutesMuch has been written recently on the remarkable compression in equity volatility and in particular the VIX, which is generally synonymous with equity vol. What I find amazing is the sheer breadth and depth of this volatility compression, across markets as demonstrated in the attached chart (as at 18 February 2013, source data: Bloomberg) which … More Volatility Radar : is there anything out there ?