All Briefing articles
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FeaturesInvestors are paying for hedge funds reluctance to use hurdle rates
Although two years have now passed since the US Federal Reserve started rapidly hiking interest rates, the likelihood that your hedge fund manager will have a ‘hurdle rate’ – a minimum rate of return before performance fees kick in – has not changed. Only a quarter of hedge funds, by our count, have such a threshold in place and the practice does not yet show signs of becoming more widespread, even though the risk-free rate has now exceeded 4% for well over a year.
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FeaturesAn inflection point for India bonds
The impending inclusion of Indian government bonds (IGBs) in JP Morgan’s widely tracked $240bn (€220bn) Govern ment Bond Index-Emerging Markets (GBI-EM) index is seen as a milestone. However, while some asset managers hope it is the beginning of a more open investment culture, others are more circumspect.
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FeaturesSecuritised credit keeps on shining
For a market with a difficult past, some could even say an image-problem, securitised credit has been performing remarkably well in recent years.
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FeaturesA bumper year for convertible bond issuance
The convertible bond market ended 2023 on a strong note with its main index – the Refinitiv Global Focus – returning 6% in the fourth quarter. The optimism has continued into 2024 on the back of reasonable valuations, historically low equity volatility and better opportunites.
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FeaturesMiFID II reforms: Bye bye unbundling?
A key part of the 2018 MiFID II package, the requirement to unbundle research from execution costs shook up the European asset management industry and changed the relationship between investment managers and their clients.
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Features
Insurance-linked securities wind brings good news for investors
In the two decades prior to 2022, the negative correlation between stock and treasury bond market returns has been a key driver of institutional investor portfolio construction. Fixed income allocations provided investors significant relief during equity market downturns and increased expected risk-adjusted returns for the popular 60/40 stock/bond portfolio.
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FeaturesNet zero’s bond index problem
The fixed-income space has not been short of sustainability innovations over the years.
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FeaturesPrivate debt managers bullish despite uncertainty
When the global financial crisis wreaked havoc across the banking sector, private credit emerged as a potential winner.
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FeaturesAvoided emissions: measuring carbon that didn’t enter the atmosphere
A few years ago, a footwear producer’s claim that it was reducing carbon emissions in the economy because its customers walked rather than took the car provoked amusement among investment managers. It wanted to prove its product was healthier and greener than competing transport modes by claiming credit for emissions prevented from petrol use. This autumn, assessments of the role played by individual low-carbon products in replacing fossil fuels are again under scrutiny in the finance sector.
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FeaturesMarket volatility: low risk does not mean ‘no risk’
Efforts to produce an accurate estimate of market risk can sometimes turn into a pessimist’s paradise, leading to a paradox. If the outcome of the estimation looks positive, investors might feel that they should not count on it, and if it looks negative, the real outcome will probably be worse than expected. From that perspective, the third quarter of this year was a very unusual one, quantitatively speaking. Not only did both risk and return decline simultaneously – a rare event – but investor sentiment also turned negative during the quarter, ending at its lowest level since the March banking crisis.
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FeaturesRegulators set sight on private market fund valuations
The current waves of rising inflation and interest rates, economic uncertainty and market volatility may eventually be remembered as just a temporary setback for managers of unlisted assets. But the regulatory initiatives announced in recent months, following pressure from investors and the public, could bring about deeper changes to the buoyant private markets industry.
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FeaturesCredit investors ready for a possible US recession
Although 2023 has been ‘interesting’ so far, it has also provided relief after the challenges and financial asset mayhem of 2022, and a wide range of asset classes have posted positive returns to date.
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FeaturesDutch suggestions for fine-tuning pension funds’ climate stress tests
Five Dutch IORPs supplemented EIOPA’s 2022 stress test, the first to include climate scenarios, with their own more granular approach
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FeaturesImpact investment: How change theory can boost key messages
Simply aligning an investment with one of the UN Sustainable Development Goals (SDGs) does not always convince individuals about the impact of an investment. Communicating about change can help.
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FeaturesOpen-ended investment funds face up to the shadow banking dragnet
The debate over the systemic risk of non-bank financial institutions (NBFIs) – sometimes called shadow banks – is a recurrent theme but it has recently moved to the forefront thanks to tighter monetary policies, geopolitical risks and factors such as the UK’s LDI crisis. While regulators are assessing the threats posed, most market participants believe changes will not happen for years. For some, there are fears that largely unleveraged segments like open-ended investment funds could be unfairly targeted
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FeaturesBritain’s LDI crisis: When things nearly fell apart
On 23 September 2022, Kwasi Kwarteng, the then UK chancellor of the exchequer, announced a £45bn (€52bn) package of tax cuts. The hand-outs, designed to please key voters, were the wrong gift at the wrong time. For several years, the Bank of England had been attempting to end quantitative easing and start putting a higher price on borrowing.
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FeaturesHow the AT1 bond market shrugged off the Credit Suisse debacle
On a late Monday evening in August, the Italian right-wing government unexpectedly announced a new 40% tax on banks’ ‘windfall’ profits derived by the higher lending rates. Shares in Italian banks tumbled, banking executives cried foul, and analysts poured scorn over the measure. The government, which was hoping to raise up to €3bn to help families and small businesses, backtracked shortly after, scaling back the tax.
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FeaturesDiscerning investor sentiment: this year’s proxy season
Every annual general meeting (AGM) season has traditionally brought with it a few symbolic moments – events that serve as broader indicators of the market’s mood when it comes to environmental and social issues.
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FeaturesFX in waiting mode after lively 2022
After a long period of muted volatility, currency markets sprang back into action in 2022 as geopolitical risk and diverging monetary policy came to the fore. This year it is quieter, but markets remain rattled over the unpredictable interest rate scenarios. As a result, many market participants are waiting for a sharper picture to emerge.
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FeaturesESG comes to money market funds
Environmental, social and governance (ESG) investing has permeated every corner of the asset management universe, and money market funds (MMFs) are no exception. European funds are under much greater scrutiny than their US and UK peers thanks to the Sustainable Finance Disclosure Regulation (SFDR), which came into effect two years ago. The result is that many MMFs are busy changing their classification to meet the higher standards.
