Liquid alternatives are a useful addition in the low interest rate environment

Christoph Netophil and Tobias Schäfer look at the classification and implementation in a multi-asset context.

Bond yields have been falling for decades. As a result, c20% of bonds outstanding today are negative yielding, which poses two major challenges for investors. First, negative-yielding bonds result in a guaranteed loss for "buy-and-hold" investors, which – consequently – does not compensate for the risk of rising yields, at the very least, which could result in significant short-term losses. Second, the traditional hedging effect of bonds in equity market corrections is limited. The synchronisation (correlation) between equities and bonds has increased and the limited scope for further falling yields in the event of a crisis limits the potential price gain for bonds. Therefore, especially in defensive and – by implication – more bond-heavy strategies, it seems reasonable to consider alternative investments to at least partially replicate or complement the traditional characteristics of bonds. In addition to commodities and illiquid investments, liquid alternatives are regularly mentioned for this purpose. What does this involve? Which strategies should be distinguished and what challenges do investors face when pursuing this path? We shed light on sensible approaches and report on our experiences.

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Authors

Christoph Netopil

Christoph Netopil has been with Berenberg since 2014. Since 2016 he has been working as a portfolio manager in the area of multi-asset mandates. Besides being the portfolio manager of the multi-asset fund Berenberg Multi Asset Defensive, he is also responsible for total return strategies as well as special mandates with a focus on derivatives and portfolio protection. After graduating in business administration from Goethe University in Frankfurt am Main and working in account management at Allianz Global Investors, the certified stock exchange trader completed a trainee program at Sal. Oppenheim.

Portfolio Manager Multi Asset
Tobias Schäfer

Tobias Schäfer has been with Berenberg since July 2018. As a portfolio manager in private asset management, he is responsible for the fund-heavy asset management core strategies. A further focus is on qualitative fund selection in the equities/bonds and alternative sectors as well as on ETF selection. Mr. Schäfer completed his apprenticeship as a bank clerk at Sparkasse Darmstadt in 2012, where he subsequently worked as an asset management consultant and completed his studies in Banking & Finance at FOM in 2015. During his Master of Finance at the Frankfurt School of Finance, he worked as a working student in institutional multi-asset portfolio management at Union Investment. There he was hired in 2017 after the successful completion of his studies and was responsible for institutional investors as junior portfolio manager in the advisory department.

Portfolio Manager Multi Asset

Suitable investment solution

Multi Asset

Our Defensive & Total Return strategies offer modern multi-asset solutions for risk-conscious investors in the low interest rate environment.

Fundname
ISIN | WKN:
Performance
1 year
Volatility
1 year
NAV

Berenberg Multi Asset Defensive R A

DE000A1H6HG5 | A1H6HG
Date: 24.05.2022
ISIN: DE000A1H6HG5
WKN: A1H6HG
Performance 1 year: -3.96%
Volatility 1 year: 4.36%
NAV: 56.82 EUR

Berenberg Multi Asset Defensive R D

DE000A1C0UM4 | A1C0UM
Date: 24.05.2022
ISIN: DE000A1C0UM4
WKN: A1C0UM
Performance 1 year: -3.96%
Volatility 1 year: 4.35%
NAV: 56.69 EUR