Workshop offers diverse investment views and strategies for market volatility

Speaking in Paris on April 10, to an audience of approximately 200 institutional investors, consultants and independent financial advisors, Natixis Asset Management CEO Pascal Voisin said, “The current market configuration has placed volatility and correlation* issues centre stage, and for the long term.” Setting the stage for the event, he identified the need for “a new way of diversifying allocation and locking in new sources of performance."

Titled "Resurgence of instability: what are the best investment strategies to make the most of volatility?" the workshop featured insights from four experts from Natixis Asset Management, including Philippe Waechter, chief economist; Olivier de Larouzière, head of interest rates; Emmanuel Bourdeix, co-CIO of Natixis Asset Management and head of Seeyond;** and Franck Nicolas, head of investment and client solutions.

Workshop insights

Europe once again a source of instability
"With Europe struggling to find new momentum, the global economy’s centre of gravity seems to be shifting to the Pacific," explained Philippe Waechter. In his macroeconomic view, Waechter identified three challenges making the euro zone a source of instability for the global economy: reinventing a new growth model, solving the debt crisis, and mapping out an institutional construction adapted to the world of today.

Low interest rates and rising volatility create fixed-income opportunities
“Recently, interest rates have converged downwards in very significant proportions, often resulting in spectacular performances,” said Olivier de Larouzière. “Given the credit risks specific to each country, sovereign debt management generates performance mainly from choices of regions and maturities.”

Tapping equity market volatility
"In equity markets that are structurally more uncertain, it has become at least as important to seek to tap equity volatility as to monitor trends," said Emmanuel Bourdeix. In his view, minimum variance-type strategies, which respond quickly to market volatility (or turbulence), can be used to significantly reduce risk in an equity portfolio without forgoing long term performance. Additionally, he said investors can take advantage of volatility’s negative correlation to equities by setting up active exposure on volatility indices.

High correlations globally limit returns from balanced allocations
“The homogenisation of tendencies in large traditional markets upsets the risk of equi-weighted portfolios and, in turn, fritters away at returns offered by balanced allocations,” concluded Franck Nicolas. This approach requires analysing the cyclicality of each sub-asset class to strategic themes (monetary policy/inflation, solvency, global trade, etc.) and their sensitivity to specific technical situations.

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