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3 Decade Safe Bet Between US & Asian Stocks, Falls Apart in Marchh

S&P 500 index rose far above benchmark gauges in Asia.


3 Decade Safe Bet Between US & Asian Stocks, Falls Apart in March

A widely regarded safe bet, consisting of a relationship between US & Asian stocks stretching back decades, has equated to losses for many firms.

This came as a shock performance for many, due to the belief that these are low risk bets on volatility.

The trades brought about much welcomed returns in the 2008 crisis, however perhaps this highlights the risks of relying on historic bets.

Govert Heijboer – Co-Chief Investment Officer of Hong Kong’s True Partner Capital was quoted;


“Being long Asia versus short U.S. volatility worked in 2008, so it back tested well as a trade for stressed environments”


“In practice, it turned out otherwise.”


Gold

With such uncertainty, many have turned to gold as a refuge as it’s risen roughly 12% this year.

Some of the largest hedge funds in the world are raising their bets on gold, as they prepare for devaluations of currencies following the coronavirus outbreak. Notable names include;

Paul Singer’s Elliott Management, Andrew Law’s Caxton Associates and Danny Yong’s Dymon Asia Capital.


Sources:
https://www.bloomberg.com/news/articles/2020-05-07/hedge-funds-burned-by-volatility-trades-that-worked-for-decades

https://www.ft.com/content/ecd9c6d5-6c42-4aa2-ae00-b741efd5af67



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