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Jean-Charles Bertrand: "We favor defensive assets, such as safe-haven currencies and CTA-type hedge funds"

According to Jean-Charles Bertrand, Head of Multi Asset at HSBC Global Asset Management, institutional investors should turn to defensive assets, such as safe-haven currencies and CTA-type hedge funds, rather than opting for sovereign bonds...

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Next-Finance : 2021 should be a year of recovery and economic recovery. What scenarios are you forcasting?

Jean-Charles Bertrand : Our central scenario (70% probability) is based on a return to normal in the second half of 2020, for which world GDP should return to its pre-crisis level at the start of 2022. But, everything will depend on the speed of vaccination plans and possible confinements. Thus, our optimistic scenario (10% probability) would return to normal more quickly by the end of the first half of 2020. Conversely, our pessimistic scenario (20% probability) would predict a later return to normal by the end of the 3rd quarter of 2020.

Asia seems to be coming off much stronger than the rest of the world. What are the best ways to position yourself in this area?

From our point of view, it is possible to set up 2 types of strategies, in particular on equities and High Yield bonds. In the first case, the idea is to combine positions in defensive markets like China and more cyclical markets (Thailand). Regarding the Asian High Yield market, we believe that the current spreads (over 600 basis points) are attractive given the relatively low default rates.

Regarding the Asian High Yield market, we believe that the current spreads (over 600 basis points) are attractive given the relatively low default rates.
Jean-Charles Bertrand, Head of Multi Asset at HSBC Global Asset Management

Some European institutional investors nevertheless fear a new market collapse. What are their solutions to limit the risks? Should they increase their allocations to sovereign bonds despite negative yields?

One solution would be to turn to options, but this solution is generally expensive and even more so given current volatility levels. This is the reason why we favor defensive assets, such as safe-haven currencies (particularly the Yen) and alternative funds such as CTA (commodity trading advisors). Regarding sovereign bonds, we believe that we need to be cautious and that they offer less capacity given the current low level of interest rates.

The massive injection of liquidity by the central bank raises fears of a devaluation of certain currencies and a sharp resurgence of inflation in the medium to long term. This fear is leading some investors to turn to gold or even cryptocurrencies. What do you think of this type of asset?

Gold does make sense in today’s environment. For cryptocurrencies, we are more reserved because of their extreme volatility (not very consistent with the notion of safe haven) and their low price history. In general, we have little faith in a strong development of these cryptocurrencies, given the reluctance of States and monetary authorities to give up their right of seigniorage.

We have little faith in a strong development of these cryptocurrencies, given the reluctance of States and monetary authorities to give up their right of seigniorage.
Jean-Charles Bertrand, Head of Multi Asset at HSBC Global Asset Management

Alternative management is often synonymous with returns uncorrelated from the markets. However, some have particularly disappointed investors in recent years. Are there any specific alternative strategies that should be favored in this environment?

Yes, we currently favor 3 types of alternative strategies:

  • global macro alpha-generating funds,
  • CTAs as I told you previously,
  • and finally funds implementing alternative risk premium strategies (value, momentum and carry on several asset classes)
RF 14 January

Article also available in : English EN | français FR

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