Insights
Your risk manager may need help
In August 2022 it became mandatory for IFMs (ManCos and AIFMs) to integrate Sustainability Risk in their risk management. The modified level 2 directives and regulations concerning UCITS and AIFs
SFDR Article 6 Opt-out explained
Exegesis is usually reserved for religious scholars trying to extract the last drop of meaning from sacred texts. Most of the sacred texts of the ESG are accompanied by detailed
A house of cards?
Lately, the US Federal Reserve has acknowledged having misjudged the timing, size and staying power of inflation and consequently accelerated monetary tightening. Should the broader finance market have a similar moment
Crypto winter is coming
Cryptos have seen significant losses. Readers of this column (blog Mar 2021. Jan 2022) will know that we are not the slightest surprised. We do, however, believe it is necessary
Is your pension fund at risk of blowing up your savings?
Into a portfolio squeeze, eye’s wide shut? Liquidity risk to investors balance sheet is on the rise. Should inflation stay sticky and Central banks accelerate monetary withdrawal - will investors then find
An invisible portfolio risk
An invisible portfolio risk To most market participants, financial risk is like talks about the climate crisis, its only “real” when the sea level reaches your living room. Macroeconomic risk is now
The Covid-19 end game?
Financial market risk is rising. Central banks are stepping up efforts to dismantle 13 years of massive disaster stimulus programs. Portfolio risk is increasing, as stocks and bonds from start
Jackson Hole summit 2021
Central bankers and the untractable problem of QE This year’s meeting of the world’s central bankers in Jackson Hole takes on a particular importance. Central banks face the unique challenge
Freedom Fighters vs Central Banks?
Cryptocurrencies are hot! Upon closer inspection, they are a bad idea coupled with a brilliant technology. The technology will be broadly applied and even accepted by central banks. Existing cryptocurrencies
Cry wolf
Inflation is getting a lot of airtime these days. Bond yields are increasing rapidly, and much ink is spilled on guessing whether inflation or a rapid return to growth is
Diversification works - most of the time
Early last week we recommended investors to reduce equity holdings. Many investors have a tendency to focus only on one set of data when making allocation decisions. We look at
2020: A year almost like any other
From the point of view of the financial markets, 2020 was a good year. The sector praised itself for its ability to “see through” to the moment where the CoviD-19
Compliant with new investment oversight?
So, is your IFM in compliance with the investment oversight requirements? Are you really really sure? The financial authority have placed still more responsibility on the Luxembourg investment fund industry. This
Habemus Brexit
"Brexit is finally a reality. A fatally flawed referendum was followed by a disastrous political process that no responsible UK politician can be proud of. UK obtained the thinnest of
Economic aid, vaccinations and then?
A new stimulus round has finally taken form in EU and US. The coronavirus vaccine inoculation has started. The UK Brexit (or)deal is done. The primary financial assets, stocks and
Herd immunity and economic growth
Financial markets should probably take the new strain of the Sars-CoV-2 rather seriously. Its higher infectiousness increases required level of herd immunity by quite a bit. More people will have
The shrinking USD?
Opportunities in forex markets are rare as markets are generally highly efficient. We view odds are increasing for a USD weakening potentially of some 20% eventually taking EUR/USD towards 1.45.
More good news
The good news keeps arriving regarding the CoViD-19 vaccine together with a continued increase in the infections worldwide. We can now be reasonably certain that the pandemics will be brought
A vaccine against the depression
The joint statement from Pfizer and BioNtech of successful phase three trials of vaccine against CoVid-1 has the potential to be the next game changing event in the SARS 2
Benchmarks? Do we need them?
New benchmark recommendations from ESMA aim to correct the way funds are using benchmarks. Since the introduction of the Benchmark Directive in 2018, many funds have effectively removed relevant benchmarks
A correction or just volatility?
The Covid pandemic (a once in a century event, one hopes) again accelerates briskly across Europe. The US Federal Reserve Bank has revised its policy objective (a once in three
Risk allocation is neutral
Active Risk Allocation (ARA) update: The recommended risk allocation has stabilised around neutral after a short period of advising slightly below average risk exposure. Seen from a top-down view allocation is
A sector rotation is building
Active Risk Allocation (ARA) update: Asset allocation has for decades been known to be the most important single factor for investment return. Our Active Risk Allocation aims to get the balance
Trimming portfolio risk
Active Risk Allocation (ARA) update: The recommended portfolio risk allocation is slowly falling below neutral after an extended period of elevated risk exposure. Several factors are changing yet again and none
Time to prepare for trouble
A bungled response in the USA to the pandemic now threatens to derail the global economic recovery. The US economy will likely shrink by 3-4% in 2020-22. A Federal Reserve
The return of market risk
On 25 May 2020 we wrote that something was afoot in the financial markets. We observed that both bond markets and stock markets were gaining on a global scale. It
A narrow margin of error
We are getting worried. Not about the progress of the Covid-19 pandemic, but about specific areas of the financial markets. We have a sneaking feeling that the markets are heading
A coronavirus exit strategy
Data now indicate that very few people under the age of 60 get symptoms when they are infected with the disease and even fewer die from it. Infections and deaths
“Nobody saw it coming”
Once the Coronavirus has been successfully brought under control, the financial markets will begin to discuss who to blame for the abysmal investment results. Only when the tide goes out do
Light at the end of the tunnel
The growth rate of the COVID-19 virus is falling worldwide, and a few countries are now taking steps towards relaxing the lockdown initiatives. We expect that several countries will announce
The safety net is in place!
Active Risk Allocation (ARA) update: With yesterday´s news that the Japan State Pension Fund GPIF is ready to take a 31% holding in foreign government bonds, one of the final bits
The cost of a bail-out
Could the global economies bear to simply make the private sector whole? Compensate the private sector for the brutal drop in economic activity that looks increasingly likely? Under a set
Credit crunch vs financial crisis
The majority of newspapers and analysts are looking for a financial crisis. In our view we are in a credit crunch, potentially heading straight for a credit crisis. A financial
A concerted effort
This week’s most important investment decision is to start shorten duration of government bond portfolios. We also recognise that a shift towards a risk-on episode is in the offing as
Margin call
Through more than a month we have recommended zero allocation to risk assets and only to invest in recession assets. We have been adamant in our dire warnings about the
The economy is shifting into a new lower gear
We reiterate our view that the financial market sell-off in risk assets is likely to deepen and we repeat our recommendation to reduce exposure to stock markets and high-yield bonds.
Coronavirus - the sequel
Uncertainties dominate, and the stock market sell-off will continue. Sell equities and high yield bonds and Buy US long bonds. We reiterate our view that the financial market sell-off in risk
Putin's great week
While everybody is looking the other way, Putin reasserts Russia’s influence Last week was great one for Russian president Vladimir Putin. He torpedoed the co-operation with Saudi Arabia, an axis which
Coronavirus and all that
Uncertainties dominate, and the stock market sell-off will continue. Sell equities and high yield bonds. Be careful to separate known facts from hopes and guesswork. When trying to get our heads
US treasury bonds rally
Active Risk Allocation (ARA) update: Our primary indicator has pointed towards that investors should reduce risk assets since around Christmas. The same indicator is now falling fast through neutral driven by
Value investing - for and against
In finance there are many investment styles. The ones best known are from quantitative studies by Fama & French in the 90'ies. They initially focused on the factors: Capital size
How much is investment research really worth?
An unintended consequence of MiFIR A side effect of the MiFID2/MiFIR regulation is that major investment research houses have been given an unwelcome reality check. It appears that their research is
The problem with KIIDs?
Much like the piece of paper you find in any pack of medicine, the KIID documents were meant to be something that the investors could read before investing in order
General issues on MiFID2 in Luxembourg
Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments as amended by the Directive 2016/1034/EU of the European Parliament and
MiFID - Bad news for the distribution of investment funds
Banks and other institutions often perform the role of distributors of investment products. Nobody inside the business is in doubt how it works: Roughly half of the income generated by
Swing pricing – fair prices for all
Swing pricing is a mechanism protecting the interests of long-term investors in fund vehicles against the trading activities of short-term investors. To counter the dilution effect on the fund’s assets of
More chicken games
Apparently we are in for a new round of Chicken. The Greek government during the weekend presented its wish list (or demands, if you like) to the rest of the
Regulatory compliance
We have witnessed a strong increase in the regulation of the financial sector in general and especially in asset management and private banking. So much so that companies have gone
Establishing an investment fund
Luxembourg has truly positioned itself as Europe’s premier location for fund domiciliation. Some 30,000 fund structures are domiciled in the Grand-Duchy. It is characterised by a no-nonsense regulator, a wide
Portfolio manager and fund selection
We have witnessed a strong increase in the regulation of the financial sector in general and especially in asset management and private banking. So much so that companies have gone
Investment process analysis
Are you unhappy about the investment return offered to the clients? Are the clients unhappy about their return? Is the reason for the underperformance clear to everybody in your organisation,
Asset allocation
In the current situation with rapidly intensifying competition and a significant pressure on margins, many asset managers resort to concentrating on one particular asset class, leaving it to investors themselves
