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  • August 21, 2019
    Macroeconomics & Risk
    Eoin Murray
    We analyse six risk factors: volatility, correlation, stretch, liquidity, event and ESG
  • May 30, 2019
    Fixed Income
    Fraser Lundie
    As the Multi-Strategy Credit hits a key milestone in June, Fraser Lundie, Head of Hermes Credit, looks back on how the strategy has fared in challenging markets since inception.
  • Eoin Murray
    We analyse six risk factors: volatility, correlation, stretch, liquidity, event and ESG
  • February 1, 2019
    Macroeconomics & Risk
    Eoin Murray
    Investors scanning the risk universe observed traces of volatility in February and then calm skies until the end of the third quarter. The scenario has changed, with equity markets flaring in October and November.
  • December 18, 2018
    Macroeconomics & Risk
    Eoin Murray
    Investors scanning the risk universe observed traces of volatility in February and then calm skies until the end of the third quarter. The scenario has changed, with equity markets flaring in October and November. Seasoned asset-gazers may not be surprised – in our view, market pressures have been building for some time amid slowing growth and trade tensions – and we continue to recommend that investors consider the full gamut of risks and commit to a long-term view as they chart a course ahead.
  • November 19, 2018
    Macroeconomics & Risk
    Eoin Murray
    Trump, tariffs, trade wars, terrorism and tech: a decade on from peak global financial crisis, this is where we are today. The more important question for investors, however, is where to next.
  • August 20, 2018
    Macroeconomics & Risk
    Eoin Murray
    Risk is amorphous, creating investment opportunities and threats to capital at each stage of the cycle. In response, investors must watch for familiar patterns and new disruptions amid streams of financial indicators. Models based on statistical history can serve as useful, if inexact, guides to the future. But we need to use all the tools at hand, going beyond number crunching to consider geopolitical tensions and sustainability concerns, to separate meaningful signals from the noise. We recommend tracking the following six indicators to recognise risk in its current form – and identify where opportunities lie.
  • August 20, 2018
    Macroeconomics & Risk
    Eoin Murray
    Eoin Murray, Head of Investment at Hermes Investment Management, discusses the recent ‘quantmare’ which took place in June: Ever had a recurring nightmare? Markets are having one right now. In August 2007, a small subsection of the global markets was hit by a violent sell off that preceded the financial collapse the following year. Those who lived through this episode still bear the scars. Market neutral strategies, which formed the liquid element of many multi-strategy hedge funds that were holding piles of illiquid credit, became the go-to element for fire sale in their portfolios – the easiest stuff to liquidate was equity factor exposure (today’s systematic beta). As they did so, all factors started moving against these market neutral funds – including the one I was running at the time. The biggest fund to be hit was Goldman Sachs' Global Alpha. It had around $12bn in assets and was several times leveraged and prompted Goldman’s chief financial officer David Viniar’s famous quote: “We were seeing things that were 25-standard deviation moves, several days in a row” (sic!). The fund closed in 2011, with a mere $1.6bn left.
  • August 17, 2018
    Macroeconomics & Risk
    Eoin Murray
    US author John Steinbeck championed the ability of individuals to adapt to new environments. Investors should be similarly adaptive. Volatility may have declined in Q2 after a jumpy start to the year, but our forward-looking indicators suggest that markets are tiring at the end of a long cycle: US equity valuations are stretched relative to history and asset-class correlations are primed for decoupling. Markets are vulnerable to shocks, and investors should be ready for new colours and fire.
  • Eoin Murray
    Dickensian conditions Q2 2018 Risk is amorphous, creating investment opportunities and threats to capital at each stage of the cycle. In response, investors must watch for familiar patterns and new disruptions amid streams of financial indicators. Models based on statistical history can serve as useful, if inexact, guides. But we need to use all the tools at hand, going beyond number crunching to consider geopolitical tensions and sustainability concerns, to separate meaningful signals from the noise. We recommend tracking the following six indicators to recognise risk in its current form – and identify where opportunities lie.
  • Eoin Murray
    Charles Dickens’ famous lines set the scene for a world of latent volatility, where contradictory extremes loom as equally likely realities and the slightest change in the political winds could send events either way. This encapsulates the bipolar nature of investors in 2018 to date, as they seek meaning in conflicting signals: will it be a time of inflation or disinflation, liquidity or illiquidity, growth or slump? In this issue of Market Risk Insights, we analyse key investment metrics in order to help investors navigate these Dickensian conditions.
  • February 2, 2018
    Macroeconomics & Risk
    Eoin Murray
    Last year was surprisingly hot – the second warmest on record – but it wasn’t just mercury that surprised on the upside. The bull market in risk assets gathered force, and as it continues we provide a five-factor risk outlook that could distract investors from the heat. This month, NASA reported that 2017 was the second-warmest year since 1880, when reliable records began, confounding some predictions that the atmospheric coolant of a fading El Niño would take the edge off temperatures. Global markets continued to run against the odds amid warnings about valuations. For example, last year the S&P500 gained in every month on a total-return basis, as did the MSCI All Country World Index, for the first time in 100 years. Similarly, the S&P500 completed its longest continual rise without a 5% or greater drawdown. So far in 2018, the golden spell of weather in the markets has held, and many investors retain a sunny disposition. Consensus expectations for 2018 are for an ongoing Goldilocks-like scenario for the global economy, featuring solid growth, low inflation and accommodative monetary policies.