GERMANY - The current market environment is leading to increased interest in absolute return strategies, DB Advisors has said.
Dennis Hänsel, head of quantitative strategic asset allocation at the firm, said that, at a time when systemic risks were weakening the global economy, with interest rates and dividend payments low, institutional clients were looking for investment options where stable investment returns were offered by detaching the product from the market.
Hänsel said there had been growing interest in such products over the past three years, as traditional diversification as a way of offsetting risk became harder to implement.
"Limiting losses and at the same time benefitting from the positive returns at the stock market, that is the current mantra," he said.
"With effective risk management and dynamic concepts in place, turbulent markets can offer an upside - attractive entry points and several possibilities to reduce risk."
However, he stressed that, while a dynamic asset allocation was key, absolute return mandates nevertheless entailed risk - although he acknowledged that those overweight in AAA government bonds during 2011 would have been able to offset some of the losses seen on the stock market.
Hänsel conceded that an investor's ability to implement such mandates was entirely dependant on the size of its risk budget.
DB Advisors is currently subject to a full review by parent company Deutsche Bank, with Germany's largest financial institution considering all options regarding the future of its institutional asset manager, as well as its retail branch DWS and alternatives specialist RREEF.
A sale of some of its asset management business has not been ruled out.