Blog: You, us, everyone

Consolidated research data from major investment banks suggest that 81% of surveyed investors believe that the market is in a bubble state, in particular the ultra-growth stock segment.

But at the same time, the data suggest that the same investors stay invested and look beyond the current business cycle towards transformative technologies such as healthcare tech, fintech, or the application of 5G. Also, investors are considering ESG-friendly opportunities, thereby favoring a more balanced approach on environmental, social, and governance criteria.

 

And where are the contradictions?

• Investors believe that the growth market segment will outperform (understand: Investors favor growth over value)
•  Fixed income is too expensive for risk carried forward (read: Worried investors would consider fixed income opportunities – but they don’t),
• Corrections are most likely used for buying opportunities (understand short-lived).

New technologies covering 5G, fintech, and healthcare technologies are mostly growth stocks, and the prices of an individual company can correct at any time. This is not because of the global economic environment (they will continue to do well in more or less stable and forecastable external conditions), but they might be subject to a correction because of concerns around their products or management issues, amongst others. Also, investors consider that the fixed income vehicles are bearing overpriced for the risk they are carrying!

 

How to take advantage of the current situation?

Dispersion strategies take advantage of non-correlation market events and, in particular, macro events. In this case, we have set up a basket of long single stock volatility-swap and short index volatility-swap. As of now, the implied spread (differences between index and average of the basket) is at a five-year low.

 

Payout potential:

You will get back: Nominal * 10-times the difference between realized volatility basket less realized volatility index.

 

Basket & pricing:

Please ask via [email protected]