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Archive for May, 2015

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Posted On 09  May  2015  

How to manage fixed income and credit portfolios?

In recent weeks the yield on the German 10-year bonds has soared. Sentiment turned from expecting negative yields in up to 20 years was reversed within days. So what can one expect going forward? Markets never behave rationally. Triggers for big sell offs may have very little to do with economic fundamentals. Unemployment in Europe remains high. Economic growth is sluggish. Long term demographics are not favorable. Sell offs can result from simple market dislocations and lack of liquidity. The concentration of assets in very big funds is dangerous. If BlackRock or PIMCO decide to change their asset allocations from bonds to cash or equities or alternatives or even decided to adjust the duration of their vast holdings, the rest of the bond investing community will be in serious trouble. Since simultaneous very large portfolio adjustments will be difficult, it is important to think about how to design portfolios that

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Posted On 04  May  2015  

Algoam Currency Management Strategies

Currencies are the most liquid markets in the world and often can be very volatile. The daily price movements can often exceed the interest rate differentials. With divergent monetary polices in the major economic blocks, currency volatility may rise. It is generally assumed that rising rates cause currencies to appreciate. There is no sustainable correlation between rising rates and rising currency values. Economic factors contribute a lot more to long term currency value developments. A great deal of progress has been made in understanding currency movements. Our understanding of the FX Carry Trade and how one can benefit from it and the risks it poses is better now because we’ve been monitoring FX Carry models for the last 10 years, both for high yield and G-10 currencies. The key lesson we have learnt is that currency and rate risks have to be managed. We also have a better understanding of