Focus Sections » OTHER FOCUS SECTIONS » EQUITY STRATEGIES

— ‘Although the media often paints quite a different picture, nepotism and corruption have had their roots fundamentally weakened’ Dr Andreas Gummich, DWS

As a country, Russia is worthy not only of headlines on the front page but also on the investment pages. With increased transparency and structural reforms comes real growth and a better business environment.
The arrest of Mikhail Khodorkovsky in autumn last year and the recent dissolution of the cabinet highlight the greatest risk in Russia: its lack of legal and political transparency. This is, however, not unusual in a developing economy.
We therefore class such a case as a typical “event risk” to which even positive markets tend to resort to swift overreaction, normally recovering within a very few days when there are no other negative repercussions. For example, when Mr Khodorkovsky’s “right hand man” and head of Menatep Bank, Platon Lebedev, was arrested in July 2003, the markets initially lost 15 per cent, but within three weeks they added 25 per cent to stand ahead of where they had been prior to the incident.

In uncertain market conditions, fund managers may go for a product that produces gains from two completely different investment styles.

— ‘Those managers seeking to control equity risk more organically and add flexibility to equity portfolios are now looking at these products as a viable tool’ Max Butti, Euronext.liffe

Private wealth managers may be shying away from putting USFs to use because the concept takes some figuring out. But the results are worth the effort.
Launched by Euronext.Liffe in January 2001, universal stock futures (USFs) were initially utilised predominantly by institutional players. Although some private wealth managers have been using the product selectively since its inception, USFs are starting only now to find their way into private portfolios, despite limitations imposed by management mandates and regulators. In particular, those managers seeking to control equity risk more organically and add flexibility to equity portfolios are now looking at these products as a viable tool.

Quantitative analysis provides a powerful tool for identifying investment opportunities and for suggesting how to best structure a global portfolio: it’s all about picking the winners across countries and across industries.