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.
Ik kan mezelf wel voor mijn kop slaan. In 2021 kocht ik een nieuw huis en sloot een hypotheek af tegen een ultralage rente. Echt zo ultralaag, dat ik je vijftien jaar geleden waarschijnlijk keihard had uitgelachen als je me dat had verteld. Ik herinner me uit die tijd hoe een collega me trots vertelde dat hij zijn hypotheek tegen 4% rente had vastgezet. Goed geregeld, vonden we toen.
Since the beginning of 2023, investors have been timing the first rate cut of central banks. Central banks’ mantra is “we are data-dependent”. This implies that their next policy steps depend fully on the information incoming data will provide. Inflation numbers have come down substantially, but with strong wage pressure and healthy profit margins, the last miles back to target could prove difficult. At which point is policy restrictive enough? When is the transmission mechanism of monetary policy properly working and how long does it take to observe the intended effect on inflation? Is central bank policy already too tight for too long, and should one lift their hedging ratios before it is too late? Or will the last miles of inflation prove to be more sticky and should we wait with overweighting interest rate sensitive assets? This essay covers the theoretics of monetary policy transmission and studies the current transmission of ECB’s policy in the European economy.
In deze editie van het VBA Journaal interviewen wij Martijn Vos en zijn collega Edwin Massie. Martijn is een bekende naam in de financiële wereld, hij is momenteel Chief Operating Officer (COO) bij Ortec Finance. Hij is verantwoordelijk voor advies- en modelleringswerk voor pensioenfondsen, verzekeraars en staatsinvesteringsfondsen, waarbij hij klanten begeleidt en helpt bij investeringen en risicobeheer. Bovendien schreef hij vorig jaar samen met co-auteur Alfred Slager het boek: “Decision Making for Pension Boards”. Martijn heeft zijn VBA-diploma behaald in 1997 en is vele jaren dagvoorzitter van het jaarlijks terugkerende ALM-congres van de CFA Society. Tijdens dit interview zullen we enkele aspecten van het nieuwe pensioenstelsel verkennen. Edwin Massie is teamleider bij Ortec Finance, expert op het gebied van Asset en Liability Management (ALM), risk management en investment consultancy.
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.
VIER GENERATIES GELD
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.
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.
Artificial Intelligence (AI) and its profound manifestation in ChatGPT are rapidly transforming the financial landscape, providing financially savvy investors with a trove of opportunities while introducing a set of unique risks and challenges. The integration of AI in finance is not just a fleeting trend; it is a seismic shift reshaping how decisions are made, risks are managed, and opportunities are seized.
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.