Progress in trade talks between the U.S. and China and in Brexit negotiations knocked down safe assets last week. Bond yields rose in most developed countries and gold prices fell, as the stance on both thorny issues reversed and turned positive.

GAM Investments' Tim Love reflects on the performance of his frontier market plays, Vietnam, Argentina, Romania, Pakistan and Saudi Arabia (VARPS) so far this year and discusses the investment opportunities and risks associated with these economies.

Volatility regimes are decisive for most investment approaches, particularly hedge funds. For both top down players (CTAs, Global Macro, FI Sovereign Arb.) and bottom-up strategies (L/S Equity, Event Driven, Credit Arb.), volatility deeply influence their universe and the trendiness of opportunities.

Bond market performance in 2019 has been dominated by a theme of central banks pivoting towards easier policy. In particular, the US Federal Reserve has signalled potential interest rate cuts, marking a meaningful shift compared with the hiking cycle of the past three years (Figure 1). This has been a driving force behind double digit returns in many sectors of the bond market in the first half of the year.

Despite massive headwinds from trade tensions, Brexit deadlock and the manufacturing recession, asset prices have been incredibly buoyant so far this year. But as we head into Q4 2019, the sky starts to fill with clouds. We believe the balance of risks is highly asymmetric and turn more risk adverse, with hedge funds as a possible way to navigate the uncertainty looming on the horizon.