Volatility

Over 2014 there has been a steady decline in the yield on German government bonds. As a result bunds have outperformed other developed markets. This outperformance could have been driven by two factors...

One may reasonably argue that the recent flows into the Low Volatility strategies might affect their future performance because of the flow pressure on the prices of the companies that generally are selected by this investment approach. More recently, some market participants have even referred to Low Volatility investing as “a bubble”.

Fitch Ratings says in a new report that absolute return funds’ performance has improved with over 70% of funds posting positive performance in 2012 and 2013, supported by more favourable market conditions. Returns have showed low volatility but have not always been independent of market conditions, notably volatility and correlation.

The remainder of 2013 is setting up for further gains and hedge funds are positioned to take advantage of the opportunities. The US economy is expanding steadily and growth will likely accelerate in the 2nd half of the year as fiscal restraint wears off.

THEAM has just renamed its smart beta BNPP L1 Equity World Low Volatility fund Parvest Equity World Low Volatility. The fund’s strategy and portfolio management team remain unchanged...