Investment Publications Highlights: Fourth Quarter 2019
Fourth quarter’s edition summarizes articles on FX markets.
Investment Planning
With Trend-Following Funds Down Sharply This Fall, Should Investors Fish or Cut Bait?
Fish, but only if investors can accept very lumpy returns. The SG Trend Index of ten large trend followers (e.g., Commodity Trading Advisors or managed futures strategies) fell more than 4% in both September and October and only matched cash’s return over the past five years.
Liability-Hedging Strategies for US Plan Sponsors in the Low Interest Rate Era
As sponsors of US single-employer defined benefit plans know all too well, interest rates have experienced dramatic swings in recent years. While many plan sponsors have adapted to this environment by strategically hedging their liability interest rate risk, many are still questioning the efficacy of doing so—especially when interest rates appear to be low. Yet, failing to hedge long-duration liabilities with long-duration assets is a risky endeavor that exposes the plan sponsor to significant downside risk.
Outlook 2020: Ten Investing Themes for the Coming Year
Our thoughts on key macro questions, emerging opportunities, and risks in 2020.
Will Weak Economic Data in the Euro Area Undercut Its Equities?
No, we don’t think so. While euro area economic activity has weakened meaningfully, with real GDP growth falling to its lowest annual pace (1.1%) since 2013 in third quarter, strong equity returns aren’t dependent on robust economic growth. Ultimately, we continue to like the bloc as part of a risk-controlled overweight to global ex US equities funded from US equities.
Pension Schemes in Pursuit of Income, Growth, and Diversification
A universal approach to portfolio construction can help schemes achieve required return targets whilst adding additional upside from alpha generation; reduce risk through true diversification; and generate sufficient income to comfortably meet both planned and unplanned cashflow needs.
Should Investors be Concerned About Central Banks’ Ability to Fight the Next Recession?
Yes. Economic growth is slowing, and governments have limited monetary and fiscal policy responses available in the event this slowdown becomes a recession. Today, investors need to weigh the investment implications of likely policy options.
A Summary of Climate Change Science for Investors
Investors would be wise to consider climate science in their investment decision-making process. Climate risk is likely underestimated by financial markets, and there is a window of opportunity for investors to get ahead of the curve, given our expected future repricing of this risk. This paper provides a high-level overview of the current climate science and discusses a few economic implications. Put simply, we all need to think like scientists now.
VantagePoint: Fourth Quarter 2019
As economic growth slows, manufacturing contracts, and major central banks start to ease monetary policy anew, investors need to consider what policy options the world has left in the event this slowdown becomes a recession. Policy rates are approaching or have passed zero at a time in which many countries and regions have elevated levels of government debt. When these economies eventually head into a recession, what are the options for governments and what are their respective investment consequences? In this edition of VantagePoint, we look to the 1930s for some answers, while realizing that intervening changes to the global financial system rule out an exact repeat of that period.
Investment Publications Highlights: Third Quarter 2019
Third quarter’s edition summarizes five articles on machine learning.