Macro Liquidity Trends: where is going the money?
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| Risk Parity Attractiveness |
March Trends
- Japan and Emerging Equity markets have strong liquidity trends
- US Equity and Gold have moderate liquidity trends
- Europe Equity markets are liquidity neutral
- US Govies 7-10 have a negative liquidity trend
The Macro Liquidity Trends are computed using a Risk Parity Approach which has become more and more popular among Asset Managers and Pension Funds: the risk weighting for each index/asset-class is calculated using the inverse of its historical volatility. Volatilities are estimated based on three months of weekly return data.
Risk Parity in the press
"The employee pension fund of United Technologies has gradually increased its risk parity-related investments to $1.8bn, or about 8% of its total assets, up from an initial 5% allocation in 2005.
At the San Joaquin County Employees' Retirement Association, in Stockton, California, risk parity now amounts to 10% of the pension's overall portfolio of approximately $2bn."
Source: Wall Street Journal, Jan 22, 2013
Japan Equity in the press
"Japanese stocks and inflation swaps are already pricing in a bit of inflation, according to Standard Life Investments investment director Jack Kelly, who spoke in a roundtable discussion with Standard Life’s head of global strategy Andrew Milligan and Sumitomo Mitsui Trust Bank chief portfolio manager for Japanese equities Shigeru Oshita.
“A successful exit of Japan’s liquidity trap would force a major repricing of Japanese assets. To some extent this has already been seen, in equities and inflation swaps now pricing in positive, if low, inflation,” said Kelly. A liquidity trap refers to a situation in which interest rates are very low, dampening the effectiveness of central-bank action.
Meanwhile, Oshita believes there are still strong arguments for investing in Japanese equities."
Source: Market Watch, March 14, 2013
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