Reading Time: < 1 minuteSince the dot.com-inspired lows of the early 2000s, Emerging Markets have delivered healthy returns to investors, but not without volatility. Over the period from the start of 2002 to the end of 2012 the MSCI Emerging Markets (USD) index has experienced an annualized volatility of 21%p.a.,and a largest drawdown of -65% during the period 2008-2009. These … More A decade of returns and volatility in Emerging Markets

Reading Time: 3 minutesQ. If I invest an amount of money in equities, what is the cost of protecting this amount over 20 or 30 years ? We can answer this relatively simply, invoking the Black-Scholes equation. We can set the risk free rate to around 3% (approximately the 20-year swap rate) and the equity dividend yield to … More The Arithmetic of Option Pricing : What price a money-safe guarantee for pensions ?

Reading Time: 2 minutesWe’re all familiar with the stellar start to 2013 experienced by equity markets. Most developed markets are up between 5 and 6% during January. The VIX index fell to 5 year lows of 12.5 by the end of January (while VIX traded volumes broke new records). Also, many other indicators of key financial stress such … More The Great Rotation or Deja Vu Again – Ray Dalio vs Tyler Durden

Reading Time: 3 minutesThis detailed paper by the OECD RiskLab makes a useful contribution to the knowledge on DC pension guarantees and their feasibility. It rightly distinguishes between a number of different guarantees that might seem superficially similar, but could differ greatly in value (and cost) : 1. G_0 : a guarantee at point of retirement only, that … More DC Pensions, would you like a guarantee with that, sir ?

Reading Time: 3 minutesVolatility control is an approach to portfolio management that deploys capital according to risk, as measured by volatility. Click here for an introduction to the approach or here for some frequently asked questions on volatility control. Volatility control has a positive effect on risk-adjusted investment performance, this is because increases in volatility are usually associated … More Volatility Control: Long term risk adjusted returns

Reading Time: 3 minutesWhen it comes to financial markets, instincts often turn out to be wrong. It’s that time of year when many organisations and publications conduct surveys of investment professionals and market participants to attempt to elicit a consensus on themes and views for the year ahead. Such surveys are always fraught with difficulty, and generally destined … More Redington Instincts: Investment Risk Survey 2013

Reading Time: 2 minutesVolatility Control is an approach to investing that deploys capital according to risk exposures rather than fixed market exposures. It de-gears or reduces exposure as volatility rises. Read more about volatility control here, some commonly asked questions about volatility control are answered here. One beneficial feature of using volatility control as an investment approach is … More Volatility Control : the upsides of a hard floor on portfolio downside

Reading Time: < 1 minuteThis is what 2012 looked like for a volatility control approach (10% vol target) to investing in the MSCI World index. Over the year the return achieved was 11.4% with a realised volatility of 9%. Realised volatility was quite high at the start of the year, and continued to be for most of the first … More A year in the life of : Volatility Control