For more than a decade, equities have been in vogue. The relentless rise of stock markets since the 2008 global financial crisis has ensured that “buying the dip” has been a successful investment strategy, which, by a process of Darwinian selection, has fuelled the rise of many a senior investor. But what has underpinned this one-way bet?
Tina — there is no alternative (to equities, that is)
As equity dividend yields dwarfed diminishing fixed-income coupons, suppressed by lower and lower interest rates, the multiples applied to equities rose steeply.
It seemed irrelevant that many companies’ supercharged valuations were not underpinned by dividends at all, but were simply growth companies in a new paradigm — a shift in consumer demand for cleaner, more ethical and technologically pioneering investments.
However, with the advent of rampant and persistent inflation, “there is no alternative” (Tina) to equities has “turned”.
_____________
Watch: US Federal Reserve chief warns of 'pain' in reducing inflation
Global stock markets were down by more than 21 per cent in the first half of 2022, and equities can arguably no longer be “simply the best” investment choice for investors.
Concurrently — and at odds with the predominant trend this century — fixed-income assets have also cratered in 2022, driven by fears of rising interest rates.
Until now, bonds and equities have delivered positive but uncorrelated returns.
This low correlation has enabled a diversified portfolio, commonly referred to as 60:40 (60 per cent equities and 40 per cent fixed income) to deliver a stable growth profile to investors.
But that paradigm seems to have come to an end. This year's second-quarter collapse in 60:40 returns surpassed even that experienced during the worst quarter of the global financial crisis.
All this carnage to investors’ portfolios seems be happening like a slow-motion car crash.
Volatility, as measured by the CBOE Volatility Index (also known as the VIX “fear” index) is rising, but at a gradual pace relative to the sell-off in asset markets.
One argument for this is that the market overheated because of post-Covid-19 government stimulus. This was driven by furloughed employees looking for entertainment and using stimulus cheques to trade in stocks on no-fee apps, based on the advice of Reddit forums.
Whatever your choice of market elixir, it might be argued that a correction was to be expected and what we are seeing is the froth that is being blown off the top of the market. After all, based on the past decade of returns, investors are still in the money.
The fall in markets has been implausibly smooth so far but if the VIX is to be believed, further volatility is expected.
Given that statement, the asset allocation community faces some dilemmas.
Has the correction thus far sufficiently priced in the expected risks? Now that equities have lost a fifth of their value since the start of the year, are they more or less attractive? Is credit pricing in a sufficient level of defaults, making this an attractive point to add to positions?
Or should investors seek diversification from these asset classes in anticipation of further negative returns to come? In short, should you buy, should you sell or should you hide?
We do need another hero, not a private dancer
The quest for real diversification has begun and has been a driving force behind investors’ growing interest in alternatives in recent times.
Investors who previously relied heavily on the traditional equity-bond 60:40 portfolio model have found themselves increasingly looking towards private markets and real assets, which are often quite illiquid, as they seek to manage inflation and the effect of rising rates on traditional asset markets.
There are two problems we see with illiquid alternatives, such as private equity, property and venture capital.
Firstly, they have yet to mark down. With stocks and bonds down so much, it has artificially inflated the proportion of their intended allocation to private investments.
The quest for real diversification has begun and has been a driving force behind investors’ growing interest in alternatives in recent times
Alistair Sayer,
client portfolio manager at Janus Henderson Investors
This can give the illusion of resilience. However, when private assets mark down, investors might realise that they are not as diversified as their infrequent pricing has led them to believe.
Consequently, if investors realise that these assets are not as diversified as they originally thought, they might find they struggle to sell them to find real diversification.
This is where liquid alternatives can prove to be attractive. Different types of liquid alternatives produce structurally different alphas, offering different kinds of diversification and independent sources of risk.
If structured correctly, they can exhibit little correlation to stocks and bonds, with liquidity as needed.
As we move further into the second half of 2022, we believe economic and market conditions could get worse before they get better.
With a strong inflationary backdrop for economies and markets, we see this as an attractive opportunity for trend-following strategies.
_______________
Families hunt for bargains as retailers offer discounts amid rising prices globally — in pictures
Inflation is effectively an auto-correlation in prices — something that trend-following strategies are specifically designed to capture.
Alternatives are a constantly evolving part of the investment industry and new ideas or opportunities are implicit in the growth of the alternatives universe.
It can be well worth the effort to consider the potential role that alternatives can play in a balanced portfolio in such uncertain times.
What you see is what you get
Typically, alternative allocations are regarded as satellite investments within a portfolio predominantly exposed to traditional equity and fixed-income volatility.
However, by leaving alternatives as a solely peripheral investment, the strong diversification that alternatives can offer can realistically only help to mitigate the risks presented by a core allocation to equities and bonds.
It is likely that a more significant allocation would be required to achieve stronger diversification benefits.
Alistair Sayer is client portfolio manager at Janus Henderson Investors, a member of The Gulf Capital Market Association
How much do leading UAE’s UK curriculum schools charge for Year 6?
- Nord Anglia International School (Dubai) – Dh85,032
- Kings School Al Barsha (Dubai) – Dh71,905
- Brighton College Abu Dhabi - Dh68,560
- Jumeirah English Speaking School (Dubai) – Dh59,728
- Gems Wellington International School – Dubai Branch – Dh58,488
- The British School Al Khubairat (Abu Dhabi) - Dh54,170
- Dubai English Speaking School – Dh51,269
*Annual tuition fees covering the 2024/2025 academic year
Specs
Engine: Dual-motor all-wheel-drive electric
Range: Up to 610km
Power: 905hp
Torque: 985Nm
Price: From Dh439,000
Available: Now
Jetour T1 specs
Engine: 2-litre turbocharged
Power: 254hp
Torque: 390Nm
Price: From Dh126,000
Available: Now
Wicked: For Good
Director: Jon M Chu
Starring: Ariana Grande, Cynthia Erivo, Jonathan Bailey, Jeff Goldblum, Michelle Yeoh, Ethan Slater
Rating: 4/5
T20 WORLD CUP QUALIFIER
Results
UAE beat Nigeria by five wickets
Hong Kong beat Canada by 32 runs
Friday fixtures
10am, Tolerance Oval, Abu Dhabi – Ireland v Jersey
7.30pm, Zayed Cricket Stadium, Abu Dhabi – Canada v Oman
Sholto Byrnes on Myanmar politics
COMPANY PROFILE
Initial investment: Undisclosed
Investment stage: Series A
Investors: Core42
Current number of staff: 47
COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
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THE SPECS
Engine: 1.5-litre turbocharged four-cylinder
Transmission: Constant Variable (CVT)
Power: 141bhp
Torque: 250Nm
Price: Dh64,500
On sale: Now
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
Killing of Qassem Suleimani
COMPANY PROFILE
Name: Lamsa
Founder: Badr Ward
Launched: 2014
Employees: 60
Based: Abu Dhabi
Sector: EdTech
Funding to date: $15 million
THE SPECS
GMC Sierra Denali 1500
Engine: 6.2-litre V8
Transmission: 10-speed automatic
Power: 420hp
Torque: 623Nm
Price: Dh232,500
RACE CARD
6.30pm Al Maktoum Challenge Round-1 Group 1 (PA) Dh119,373 (Dirt) 1,600m
7.05pm Handicap (TB) Dh102,500 (D) 1,200m
7.40pm Handicap (TB) Dh105,000 (Turf) 1,800m
8.15pm UAE 1000 Guineas Trial (TB) Dh183,650 (D) 1,400m
9.50pm Handicap (TB) Dh105,000 (D) 1,600m
9.25pm Handicap (TB) Dh95,000 (T) 1,000m
How to wear a kandura
Dos
- Wear the right fabric for the right season and occasion
- Always ask for the dress code if you don’t know
- Wear a white kandura, white ghutra / shemagh (headwear) and black shoes for work
- Wear 100 per cent cotton under the kandura as most fabrics are polyester
Don’ts
- Wear hamdania for work, always wear a ghutra and agal
- Buy a kandura only based on how it feels; ask questions about the fabric and understand what you are buying
COMPANY%20PROFILE
%3Cp%3EFounder%3A%20Hani%20Abu%20Ghazaleh%3Cbr%3EBased%3A%20Abu%20Dhabi%2C%20with%20an%20office%20in%20Montreal%3Cbr%3EFounded%3A%202018%3Cbr%3ESector%3A%20Virtual%20Reality%3Cbr%3EInvestment%20raised%3A%20%241.2%20million%2C%20and%20nearing%20close%20of%20%245%20million%20new%20funding%20round%3Cbr%3ENumber%20of%20employees%3A%2012%3C%2Fp%3E%0A
Company%20profile
%3Cp%3E%3Cstrong%3ECompany%20name%3A%3C%2Fstrong%3E%20Ogram%3Cbr%3E%3Cstrong%3EStarted%3A%20%3C%2Fstrong%3E2017%3Cbr%3E%3Cstrong%3EFounders%3A%3C%2Fstrong%3E%20Karim%20Kouatly%20and%20Shafiq%20Khartabil%3Cbr%3E%3Cstrong%3EBased%3A%20%3C%2Fstrong%3EDubai%2C%20UAE%3Cbr%3E%3Cstrong%3EIndustry%3A%3C%2Fstrong%3E%20On-demand%20staffing%3Cbr%3E%3Cstrong%3ENumber%20of%20employees%3A%3C%2Fstrong%3E%2050%3Cbr%3E%3Cstrong%3EFunding%3A%20%3C%2Fstrong%3EMore%20than%20%244%20million%3Cbr%3E%3Cstrong%3EFunding%20round%3A%3C%2Fstrong%3E%20Series%20A%3Cbr%3E%3Cstrong%3EInvestors%3A%20%3C%2Fstrong%3EGlobal%20Ventures%2C%20Aditum%20and%20Oraseya%20Capital%3Cbr%3E%3C%2Fp%3E%0A
Rock in a Hard Place: Music and Mayhem in the Middle East
Orlando Crowcroft
Zed Books
WHAT FANS WILL LOVE ABOUT RUSSIA
FANS WILL LOVE
Uber is ridiculously cheap and, as Diego Saez discovered, mush safer. A 45-minute taxi from Pulova airport to Saint Petersburg’s Nevsky Prospect can cost as little as 500 roubles (Dh30).
FANS WILL LOATHE
Uber policy in Russia is that they can start the fare as soon as they arrive at the pick-up point — and oftentimes they start it even before arriving, or worse never arrive yet charge you anyway.
FANS WILL LOVE
It’s amazing how active Russians are on social media and your accounts will surge should you post while in the country. Throw in a few Cyrillic hashtags and watch your account numbers rocket.
FANS WILL LOATHE
With cold soups, bland dumplings and dried fish, Russian cuisine is not to everybody’s tastebuds. Fortunately, there are plenty Georgian restaurants to choose from, which are both excellent and economical.
FANS WILL LOVE
The World Cup will take place during St Petersburg's White Nights Festival, which means perpetual daylight in a city that genuinely never sleeps. (Think toddlers walking the streets with their grandmothers at 4am.)
FANS WILL LOATHE
The walk from Krestovsky Ostrov metro station to Saint Petersburg Arena on a rainy day makes you wonder why some of the $1.7 billion was not spent on a weather-protected walkway.
Under 19 World Cup
Group A: India, Japan, New Zealand, Sri Lanka
Group B: Australia, England, Nigeria, West Indies
Group C: Bangladesh, Pakistan, Scotland, Zimbabwe
Group D: Afghanistan, Canada, South Africa, UAE
UAE fixtures
Saturday, January 18, v Canada
Wednesday, January 22, v Afghanistan
Saturday, January 25, v South Africa
Key findings of Jenkins report
- Founder of the Muslim Brotherhood, Hassan al Banna, "accepted the political utility of violence"
- Views of key Muslim Brotherhood ideologue, Sayyid Qutb, have “consistently been understood” as permitting “the use of extreme violence in the pursuit of the perfect Islamic society” and “never been institutionally disowned” by the movement.
- Muslim Brotherhood at all levels has repeatedly defended Hamas attacks against Israel, including the use of suicide bombers and the killing of civilians.
- Laying out the report in the House of Commons, David Cameron told MPs: "The main findings of the review support the conclusion that membership of, association with, or influence by the Muslim Brotherhood should be considered as a possible indicator of extremism."
SQUADS
Bangladesh (from): Shadman Islam, Mominul Haque, Soumya Sarkar, Shakib Al Hasan (capt), Mahmudullah Riyad, Mohammad Mithun, Mushfiqur Rahim, Liton Das, Taijul Islam, Mosaddek Hossain, Nayeem Hasan, Mehedi Hasan, Taskin Ahmed, Ebadat Hossain, Abu Jayed
Afghanistan (from): Rashid Khan (capt), Ihsanullah Janat, Javid Ahmadi, Ibrahim Zadran, Rahmat Shah, Hashmatullah Shahidi, Asghar Afghan, Ikram Alikhil, Mohammad Nabi, Qais Ahmad, Sayed Ahmad Shirzad, Yamin Ahmadzai, Zahir Khan Pakteen, Afsar Zazai, Shapoor Zadran
Killing of Qassem Suleimani
The specs: 2018 Maserati Levante S
Price, base / as tested: Dh409,000 / Dh467,000
Engine: 3.0-litre V6
Transmission: Eight-speed automatic
Power: 430hp @ 5,750rpm
Torque: 580Nm @ 4,500rpm
Fuel economy, combined: 10.9L / 100km
The specs
Engine: 2.0-litre four-cylinder turbo
Power: 268hp at 5,600rpm
Torque: 380Nm at 4,800rpm
Transmission: CVT auto
Fuel consumption: 9.5L/100km
On sale: now
Price: from Dh195,000
THE SIXTH SENSE
Starring: Bruce Willis, Toni Collette, Hayley Joel Osment
Director: M. Night Shyamalan
Rating: 5/5
PROFILE OF INVYGO
Started: 2018
Founders: Eslam Hussein and Pulkit Ganjoo
Based: Dubai
Sector: Transport
Size: 9 employees
Investment: $1,275,000
Investors: Class 5 Global, Equitrust, Gulf Islamic Investments, Kairos K50 and William Zeqiri
