Equities
One of the notable issues of the summer has
been how to respond to the uncertainty and
dislocation caused by geopolitical events.
These include the UK referendum in June,
in which the UK voted to leave the EU; they
also include the upcoming US elections
in November, which will decide whether
Hillary Clinton or Donald Trump will become
President of the world’s biggest economy.
There have been concerns on the buy side
that the uncertainty causes some market
participants to hold back, inadvertently
triggering under-performance and thus
causing some asset owners to switch to
ETFs and passive strategies instead. Going
forward into the autumn, K&KGC’s equities
debate in London on 18 October will address this issue, as well
as the tools the buy side can use to counter it.
Regulatory initiatives around the globe continue to have
an impact on trading desks; in equities, some of the more
interesting moves from the last few months include the
introduction of a volatility control mechanism on the Hong
Kong Stock Exchange, which the exchange communicated
to investors by uploading a surprisingly funny video on
YouTube (watch it – it’s well worth it). The tick size pilot in the
US, which is testing a system under which tick sizes would be
widened for small and medium cap stocks; and the PRIIPs
regulation in Europe, which focuses on packaged retail and
investment products. The European Commission adopted a
delegated act to supplement the PRIIPs regulation, which
introduces content and methodology standards for the
key information documents that must be provided to retail
investors when they buy certain investment products.
In addition, there is a growing sense of unease about the
global shift towards passive investing, which may contribute to
periods of volatility and which may also be driving a return to
the mean as investment performance increasingly averages
out. As sober analysis from Sanford C. Bernstein has shown,
there is also the possibility that an excessive shift to passive
investing could have a detrimental effect on the economy
as a whole, due to a less efficient allocation of global capital.
We look forward to discussing these and other equities
challenges in the upcoming debates in 2016 and 2017…
October 2016
www.buysideintel.com
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