In deze editie van het journaal staat de hogere rente-omgeving centraal. Dat deed mij denken aan het antwoord dat ik recentelijk gaf op de vraag welke ontwikkeling het meest van invloed zal zijn op risicodragende beleggingen.
Op 1 juli 2023 is de Wet Toekomst Pensioenen (Wtp) ingegaan waardoor Nederlandse pensioenfondsen voor een overgang staan van het huidige FTK naar het nieuwe pensioenstelsel. Pensioenfondsen kunnen hierbij kiezen voor de solidaire pensioenregeling (SPR) of de flexibele pensioenregeling (FPR).1 In de overgang naar het nieuwe contract zal kapitaal worden toegewezen aan de deelnemers. Bij deze toewijzing wordt onder meer rekening gehouden met het al opgebouwde pensioen, compensatie voor de doorsneepremie en het opbouwen van de solidariteitsreserve in de SPR of de risicodelingsreserve in de FPR. De transitie dient voor 1 januari 2028 plaats te vinden.
Collateral management is a different game since 2022, in its July 2022 meeting, the European Central Bank (ECB) decided to increase its three key interest rates by 50 basis points (0.5%): the interest rate on the main refinancing operations, the interest rate on the marginal lending facility, and the interest rate on the deposit facility (ECB, July 2022). This measure surprised the market with its magnitude, but not with its direction, as the growing inflation in the eurozone demanded a complete change in monetary policy. This event also marked the beginning of a series of consecutive increases that have reshaped financial markets, signaling the end of an era informally known as the ‘free money era.’
After a period of low and even negative interest rates in 2020 and 2021, rates soared in 2022 and have remained high. In this article we want to address several topics. First, we illustrate what the impact on expected returns has been with a Capital Market Assumptions (CMA) model. One of the main observations is that the risk premium of equities versus bonds has declined. The second section provides explanations as well as justifications. In short, a lower equity risk premium (ERP) is not just a reflection of equities being expensive, but is justified as bonds have become riskier relative to equities. Finally, we show the extent to which the change in interest rates and CMAs leads to different ‘optimised’ portfolios. The rise in yields and the lower ERP result in more fixed income assets and fewer equities in portfolios in 2024 than in 2020. Optimised fixed income portfolios, from an asset only perspective, consist of cash and spread products, but do not contain any government bonds. That holds for both 2020 and 2024. Furthermore, the rise in riskfree yields has resulted in IG Corporates gaining a place in the spread portfolios at the expense of riskier spread products such as emerging market debt (EMD) and high yield. Within equities, developed markets have become less attractive compared to emerging markets due to increased volatility. Finally, lower risk portfolios have experienced an increase in expected return benefitting from higher yields, while higher risk portfolios have become more diversified, as differences in expected returns between (fixed income and equity) asset classes have become smaller.
Klantbelang voorop! Ontdek de impact van de aangescherpte CFA-ethieknormen op beleggingsprofessionals. De normen spelen een cruciale rol in het winnen van het vertrouwen van klanten en in het bevorderen van efficiënte kapitaalmarkten in een steeds veranderende maatschappij.
Artificial Intelligence and Large Language Models (LLMs) are adapted by society on an increasingly larger scale. Consequentially, they also make their way into the investment industry. This article discusses LLMs and their application in investments.
If you were in AI in Financial Services in 2023 it was a wild ride. Whereas AI was a tough sell in previous years; executives didn’t see the value, and readily cited explainability, or untested outcomes as a reason not to pursue the technology. Machine learning was quietly being used by quants and hedge funds, but mainstream financial services were asleep at the wheel. Then, OpenAI launched ChatGPT, and the world literally changed overnight, suddenly budgets were open, and expectations were sky high!
When OpenAI released ChatGPT in November 2022 it created a wave of excitement around artificial intelligence (AI) among the general public, media, and across industries worldwide. Such generative AI models (also called generative large language models or LLM) have sparked a new race in the tech world regarding who has the best AI offering. On one hand, the Microsoft-OpenAI partnership was leading the way with incorporating generative AI into many applications, while other big firms like Google were stepping up with their own AI tech in the form of BARD. More recently, open-source versions of generative AI such as Meta’s Llama are surging in popularity, because they enable end-users to finetune generative AIs for their own specific applications without the massive cost and data required to train a generative AI from scratch.
In the dynamic domain of investment management, a discernible paradigm shift is underway, compelling practitioners to reassess traditional approaches within an evolving landscape. Central to this evolution are dynamics that extend beyond customary metrics, prompting investment managers to synthesize considerations at the intersection of technological advancement and ethical responsibility. Against the backdrop of market adaptability to transformative forces, astute managers find themselves positioned at a juncture where exploration of emerging technologies converges with a conscientious appraisal of broader societal and environment imperatives.
Mensen vormen de kern van elke economie. Hun gedrag als consumenten en werknemers is economisch veel relevanter dan hun aantal of leeftijd. Dat is het paradigma van Amlan Roy, in zijn boek uit 2021: “Demographics Unravelled: How Demographics Affect and Influence Every Aspect of Economics, Finance and Policy”.
In 2023 the advances in AI caused extensive strikes in Hollywood hitting movie studios and streaming platforms. Writers and actors were scared AI could and would replace their plots, voices and faces. AI has the ability to revolutionize and further digitalize movie experiences. The finance industry has been similarly revolutionized by the speed and access of digital technology amplified by recent developments in AI that can replace as well as augment investment analysts. Similar as in Hollywood and (un?)surprisingly, several of these advances in AI concern voice and facial techniques.
Tijdens een etentje met vrienden ontstond vorig jaar een verhitte discussie over ChatGPT, dat toen net gelanceerd was. Er waren twee kampen: de sombermansen die in ChatGPT de ondergang van het kritische denken zagen, de doodsteek voor de creativiteit, het einde van vele mooie beroepen. Aan de andere kant zaten de techoptimisten – waar ik mezelf toereken – die van een mooie toekomst droomden waarin ChatGPT de saaie routineklusjes overneemt waardoor er meer tijd overblijft voor het diepe en echt creatieve denkwerk. Het werk zou alleen maar leuker worden, de wereld mooier. De sombermansen lachten schamper over zoveel naïeve onnozelheid. De techoptimisten wezen er fijntjes op dat de grammofoon de musicus niet werkloos had gemaakt en de digitale camera de fotograaf niet overbodig.
We had the opportunity to engage in a discussion with Simona Paravani-Mellinghoff, Global Chief Investment Officer of Solutions at BlackRock Multi-Asset Strategies & Solutions, and Assistant Professor at the Faculty of Economics at Cambridge University where she teaches a course in AI applied to Finance. She spoke with us from BlackRock’s London office, delving into the integration of AI throughout investment management and its impact on the investment landscape.