Financial markets are influenced by many factors: political shocks, central bank announcements, economic data, oil price and exchange rate movements, and natural disasters. However, there is a common theme: the economic cycle. It integrates most of these factors and is the driving force behind all liquid asset classes and their segments.
This means that tracking the economic cycle accurately makes it possible to anticipate overarching trends on the financial markets. With this in mind, we aim to identify turning points in the cycle at the earliest possible stage using a comprehensive system of leading indicators developed in-house that flags up future macro trends well ahead of the official indicators. We then gradually consolidate the information to a forecast of the key economic figures.
We apply our proven fundamental models to risk-averse absolute return and multi asset strategies. They allow us to harvest capital gains from a range of asset classes for regular performance contributions.
Credit Cycles in Bond Management
The performance of corporate bonds as a whole segment as well as within individual sectors is primarily determined by the phase of the credit cycle. Our industry allocation is therefore based on an analysis of the macro outlook as well as a critical assessment of excessive credit growth and shareholder-friendly activities such as mergers, acquisitions, large-scale share buybacks and reduced interest cover. Our leading indicators, which have been proving their worth for over 20 years, have a significant influence on portfolio adjustments.
Sector and Style Rotation for Equity Management
Liquid sector and style futures offer highly cost-efficient access to markets in order to implement our macro view by using sector overlays. The economic opinion derived from our leading indicators is reconciled quantitatively against the available liquid market segments for statistically significant correlations.
Subject to the limits of a defined mathematical tracking error budget, the sectors and styles with the greatest potential can be overweighted and those with less potential underweighted. The aim is to generate systematic excess returns while adhering to the requirements in terms of tracking error and risk budget.
