Investment

Chart of the Month: Risk is not necessarily where you think it is…

by Cedric Dingens

Following the Brexit vote, a Bloomberg article was published on June 27 titled “The USD 100 Trillion Bond Market’s Got Bigger Concern than Brexit”. The same day, and like every Monday morning, the Notz Stucki Team held its weekly investment meeting. While passionate debates over the consequences of Brexit were taking place, one of our macro specialists expressed the view that the biggest threat in the coming months could come from the US and not China or Europe. Risk is not necessarily where you think it is…

Even if newspapers were already comparing Brexit to the Lehman collapse, the FTSE Index ended the month of June up +4.4% and the MSCI World Index slightly down with a return of -1.3%. Global equity markets experienced a volatility spike during the now famous “Black Friday” but the MSCI World Index already reached June 16th levels only 3 days after the vote.

At the other end – supposedly – of the risk spectrum is the world of Government Bonds. This was the place to be invested since the start of the year and for a long time now. If you look at EFFA Indices, US Bonds with maturities above 10 years are up +15.2% YTD as of the end of June, EUR Bonds +14.1%, GBP Bonds +20.1% and CHF Bonds +14.9%. The 30y Swiss Government Bond shows a negative yield of -0.11% as of July 6th. More than USD 10 tn of worldwide debt is now yielding in negative territory.

Bond Equity Volatility
Bond Equity Volatility

Coming back to Brexit and market volatility, the chart displayed above shows the moving average of the ratio of bond volatility to equity volatility for the US, UK, EU and CH markets. Since mid-09 and the start of the equity market rally we can see an increase of bond volatility versus equity volatility. The ratio for EUR and CHF has remained in a range between 0.4 and 0.6, in line with its historical average. However the ratio for UK and US markets has significantly increased during this period. Since mid-2012 the ratio for the US has frequently been above 1, meaning that being invested in the US T-bond market today could potentially be a riskier bet in terms of volatility than having an exposure to the S&P 500 Index.

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Antonio Mira
CHIEF FINANCIAL OFFICER, MEMBER OF THE EXECUTIVE COMMITTEE

Antonio Mira joined NS Partners in 2006 as Group Chief Financial Officer. He heads the corporate functions and is involved in coordinating and implementing the decisions of the Executive Committee.
An experienced bank auditor, Antonio started his career in 1995 with Arthur Andersen, where he worked for some 7 years before joining Ernst & Young in 2002 as a Senior Manager.
Antonio is a Swiss chartered accountant and a Business graduate of Lausanne University (HEC).

Sébastien Poiret
DEPUTY HEAD OF WEALTH MANAGEMENT

Sébastien Poiret joined NS Partners in 2008 and manages funds of hedge funds and private client mandates. He also oversees the development of the Group’s offices in Mauritius.

Prior to joining NS Partners, he served as a Trader, Head of Manager research and Portfolio Manager in the USA and Switzerland for a single hedge fund (1998-2004) and for Optimal (2004-2008), Grupo Santander’s fund-of-hedge funds operations.

Sébastien holds a Bachelor’s degree in Corporate Finance from the ESPEME Business School (EDHEC Group) and an MBA in Finance and Economics from the Institute of Business Administration, both in Nice.

Abir Oreibi
BOARD DIRECTOR

Abir Oreibi joined the Board of the NS Partners Group in 2018, where she brings her truly international perspective and rich experience.
Among many other ventures, Abir set up Alibaba.com’s first European office. After living and working in Shanghai, Hong Kong, Bangkok and London, she now lives in Geneva, where she is CEO of Lift Events, an organization that identifies technology trends, their business and social impact through the organization of events and open innovation programs. Issues related to the challenges and opportunities created by new technologies as well as the strategic responses from organizations are at the heart of Lift’s activities.
Abir holds a BA in Political Sciences from the University of Geneva. She is an investor, and member of advisory and innovation boards.

Romain Pidoux, CAIA

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Romain Pidoux joined NS Partners in 2011 and heads the Group’s Risk Management.
He started his financial career in 2005 as Head of Quantitative Analysis for a Swiss Family Office, selecting funds and managing portfolio allocation. In 2008, he switched to the alternative world and joined Peak Partners as hedge funds analyst.
He is a Chartered Alternative Investment Analyst (CAIA) and holds a Master’s degree in international relations from the Graduate Institute of International Studies at Geneva University.

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