Negative Interest Rates through the Lens of the Swiss Fixed Income Model

Size: px
Start display at page:

Download "Negative Interest Rates through the Lens of the Swiss Fixed Income Model"

Transcription

1 Negative Interest Rates through the Lens of the Swiss Fixed Income Model Introduction Investors continue to witness negative nominal interest rates in Switzerland and across many markets in the eurozone, both at the short end and further out the yield curve. In fact, as of February 3, 2015, the Swiss term structure was negative out to 10 years (see Exhibit 1 below). In this Research Bulletin, we delve into the dynamics behind this phenomenon, looking across interest rates, FX, and credit markets. We highlight yield, spread and volatility shifts from the MSCI Swiss Fixed Income model in the wake of the Swiss National Bank (SNB) decision to break the Swiss franc peg to the euro. Finally, we conclude with a discussion of the shadow costs imposed by negative rates on money managers. Exhibit 1 Negative Rates Have Existed for Some Time Across Maturities, Particularly in Switzerland. Please refer to the disclaimer at the end of this document 1 of 10

2 Exhibit 2 Negative Rates in Germany. The Dynamics of Negative Swiss Rates We can broadly divide the factors driving negative rates into those that impact the short end and those that impact the intermediate to the long end of the curve. Low and negative short term interest rates have persisted in Switzerland since mid 2012; Exhibit 1 illustrates Swiss yields since October This rate environment has been accompanied by sustained low European growth, with the MSCI Europe Index falling 5.7% for 2014 in contrast to the MSCI World Index posting a positive 5.5% return for the same period 1. In addition to the economic backdrop, on January 15, 2015, the SNB unexpectedly revised its three yearold policy of maintaining a floor of 1.20 on the EUR/CHF exchange rate. This was largely due to persistent EUR selling (and CHF buying) in light of expectations for Quantitative Easing (QE) by the European Central Bank (ECB) and Greek uncertainty. At the same time that it broke the EUR/CHF currency peg, the SNB reduced short term rates in order to discourage inflows, lowering its target deposit rate to minus 75 basis points. This followed a cut announced in December 2014 to minus 25 basis points. Exhibit 3 shows the relationship between the EUR/CHF exchange rate and the actual (as opposed to the SNB s target) Swiss 3M deposit rate. 1 Returns shown are gross returns. The gross returns provide the equity returns including dividends. Please refer to the disclaimer at the end of this document 2 of 10

3 We can glean key elements of the SNB s thought process from their memo dated January 15, On the rationale for the initial introduction of the EUR/CHF floor to protect the Swiss export economy and the subsequent reason for its removal, the SNB stated: The minimum exchange rate was introduced during a period of exceptional overvaluation of the Swiss franc and an extremely high level of uncertainty on the financial markets. This exceptional and temporary measure protected the Swiss economy from serious harm. While the Swiss franc is still high, the overvaluation has decreased as a whole since the introduction of the minimum exchange rate. The economy was able to take advantage of this phase to adjust to the new situation. The short term rate cut was justified from the viewpoint of maintaining a loose monetary policy: The SNB is lowering interest rates significantly to ensure that the discontinuation of the minimum exchange rate does not lead to an inappropriate tightening of monetary conditions. The SNB will continue to take account of the exchange rate situation in formulating its monetary policy in future. If necessary, it will therefore remain active in the foreign exchange market to influence monetary conditions. More technically we can view the SNB s interest rate decision through an uncovered interest parity (UIP) framework. Under UIP and a floating exchange rate regime, CHF short rates and EUR short rates would be related as follows: CHF Short rates EUR short rates = Forward EUR/CHF exchange rate Spot EUR/CHF exchange rate Clearly, the removal of the floor (and expectations of lower EUR/CHF due to the appreciation of the now freely floating CHF) would lead, all else equal, to a fall in Swiss domestic short rates. 2 See Swiss National Bank discontinues minimum exchange rate and lowers interest rate to 0.75%,, Please refer to the disclaimer at the end of this document 3 of 10

4 Exhibit 3 Exchange Rate Versus Swiss 3M Deposit Rates. Intermediate and long term rates now reflect expectations of fewer rate hikes. Rates on the long end have also declined coincidently with Quantitative Easing, which the ECB under Mario Draghi put into place for 1 trillion on January 22, In addition to the decline in government bond yields, credit spreads have re priced following the SNB announcement. Exhibit 4 shows market movements in Swiss Investment Grade credit (IG) leading up to and post the peg removal/rate cut. Please refer to the disclaimer at the end of this document 4 of 10

5 Exhibit 4 Credit Spreads Have Re-priced. Note that AAA spreads relative to the swap curve had been negative for quite some time before the deeper rate cut announced by the SNB on January 15. We see that immediately after the SNB announcement (red dashed vertical line), Swiss IG spreads widened. IG yields also plummeted, with highly rated paper reaching very low and even negative levels. Quantitative Insights into the Current Risk Regime We next provide some quantitative measures of the FX, rates and credit action observed in Switzerland, using MSCI risk factors in each of these markets as a guide. Exhibit 5 shows daily volatility estimates 3 for the EUR/CHF FX rate (right hand axis in all charts) as well as the Barra Shift, Twist and Butterfly (STB) factors for the Swiss yield curve since November The STB factors reflect parallel, steepening, and bending moves in the term structure. Two facts are telling here. First, it is immediately obvious that the SNB s removal of the EUR/CHF floor sent the FX and rates markets into a markedly different volatility regime. Second, if we turn to the STB factors, the shift factor has led much of the change in volatility regime. Clearly, the FX and rates markets were caught off guard by both the abandonment of the floor and the level of shift in the yield curve. Further, volatilities have remained elevated on the back of ongoing large fluctuations in the Swiss curve. 3 We use as our smoothed volatility estimate the EWMA model with a weight of λ = 0.94, per the following: σ 2 t= λσ 2 t 1 + (1 λ) r 2 t, where σ t is the volatility on day t, and r t is the return on day t. Please refer to the disclaimer at the end of this document 5 of 10

6 Exhibit 5 Volatility Metrics for our Swiss FX Rates and Yield Curve Factor. We can also detect the market s view on rates volatility by considering our implied volatility factor for Swiss rates 4 (see Exhibit 6 below). Interestingly, the implied volatility factor experienced an increase in its volatility ahead of the SNB announcement, before attaining a new level after the peg removal. Again, we see a similar story the Swiss rates market appears to have entered a different regime based on riskneutral estimates of volatility. 4 The implied volatility factor is based on the log return of the market implied volatility of the 10 year yield. Please refer to the disclaimer at the end of this document 6 of 10

7 Exhibit 6 Volatility Metrics for our Swiss Implied Volatility Factors. Turning to credit, we can make some parallel observations using the volatility of our Swiss credit factors (shown in Exhibit 7 below). IG credit risk factor volatility spiked at the same time as the announcement this is in line with the market action in credit spreads discussed earlier. Also note the differentiation in volatility across credit qualities after the announcement. Such differentiation is typical in crisis periods as investors display flight to quality behavior and weaker credits sell off. Please refer to the disclaimer at the end of this document 7 of 10

8 Exhibit 7 Volatility Metrics for our Swiss Credit Factors. Please refer to the disclaimer at the end of this document 8 of 10

9 Conclusion Research Bulletin By abandoning the EUR/CHF peg and establishing negative policy interest rates, the SNB has precipitated dramatic market moves across asset classes. In this Research Bulletin, we have analyzed this new risk regime through the lens of the MSCI Swiss Fixed Income factor model. The model reflects unprecedentedly negative sovereign yields, the differentiation of spread volatility among credit qualities after the peg break, and the observed negative investment grade yields. In the long run, negative yields can impose non obvious costs on investment managers. Intuitively, the lower bound for interest rates is zero if rates are sufficiently negative over a sustained period, then investors would rather hold cash than deposits. 5 Negative short term European rates are already having a deleterious impact on large money market funds at the time of this writing. 6 Indeed, during the financial crisis part of the U.S. Federal Reserve s rationale for maintaining positive rates was the effect of a sustained zero or negative rate environment on the viability of money market funds. The minutes from the December 16, 2008 Federal Open Market Committee meeting 7 (the last time the federal funds target was lowered) explicitly state that Zero or near zero rates cause a high volume of fails in the Treasury securities market, leading to decreased liquidity in that market and potentially in other fixed income markets. And if short term rates remain very close to zero, some money market funds probably will close. Such costs may argue against cutting the target funds rate to zero and driving the effective rate closer to zero. If the SNB policy proves sufficiently costly, it may be reflected in the term structure factors observed in our models. Short term rates may have to move higher and influence long term rates at the same time. On the other hand, if the SNB s venture into uncharted territory turns out to be stabilizing, we may be entering a sustained period of negative rates, given the European backdrop of low growth and Switzerland s status as a safe haven. 5 In practice, there is likely to be a convenience yield c for holding large amounts of cash in hand versus in deposits at a bank, so that an investor will prefer deposits yielding greater than c % to cash yielding zero. 6 European Money Fund Managers Brace for Losses, the Wall Street Journal, Dec 17, Please refer to the disclaimer at the end of this document 9 of 10

10 Client Service Information is Available 24 Hours a Day Americas Europe, Middle East, Africa & India Asia Pacific Americas Atlanta Boston Chicago Montreal Monterrey New York San Francisco Sao Paulo Stamford Toronto (toll free) Amsterdam Cape Town Frankfurt Geneva London Madrid Milan Mumbai Paris Zurich (toll free) China North China South Hong Kong Seoul Singapore Sydney Tokyo Research Bulletin (toll free) (toll free) (toll free) Notice and Disclaimer This document and all of the information contained in it, including without limitation all text, data, graphs, charts (collectively, the Information ) is the property of MSCl Inc., its subsidiaries (including without limitation Barra, Inc. and the RiskMetrics Group, Inc.) and/or their subsidiaries (including without limitation the FEA, ISS, and CFRA companies) (alone or with one or more of them, MSCI ), or their direct or indirect suppliers or any third party involved in the making or compiling of the Information (collectively (including MSCI), the MSCI Parties or individually, an MSCI Party ), as applicable, and is provided for informational purposes only. The Information may not be reproduced or redisseminated in whole or in part without prior written permission from the applicable MSCI Party. The Information may not be used to verify or correct other data, to create indices, risk models or analytics, or in connection with issuing, offering, sponsoring, managing or marketing any securities, portfolios, financial products or other investment vehicles based on, linked to, tracking or otherwise derived from any MSCI products or data. Historical data and analysis should not be taken as an indication or guarantee of any future performance, analysis, forecast or prediction. None of the Information constitutes an offer to sell (or a solicitation of an offer to buy), or a promotion or recommendation of, any security, financial product or other investment vehicle or any trading strategy, and none of the MSCI Parties endorses, approves or otherwise expresses any opinion regarding any issuer, securities, financial products or instruments or trading strategies. None of the Information, MSCI indices, models or other products or services is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. The user of the Information assumes the entire risk of any use it may make or permit to be made of the Information. NONE OF THE MSCI PARTIES MAKES ANY EXPRESS OR IMPLIED WARRANTIES OR REPRESENTATIONS WITH RESPECT TO THE INFORMATION (OR THE RESULTS TO BE OBTAINED BY THE USE THEREOF), AND TO THE MAXIMUM EXTENT PERMITTED BY LAW, MSCI, ON ITS BEHALF AND ON THE BEHALF OF EACH MSCI PARTY, HEREBY EXPRESSLY DISCLAIMS ALL IMPLIED WARRANTIES (INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF ORIGINALITY, ACCURACY, TIMELINESS, NON INFRINGEMENT, COMPLETENESS, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE) WITH RESPECT TO ANY OF THE INFORMATION. Without limiting any of the foregoing and to the maximum extent permitted by law, in no event shall any of the MSCI Parties have any liability regarding any of the Information for any direct, indirect, special, punitive, consequential (including lost profits) or any other damages even if notified of the possibility of such damages. The foregoing shall not exclude or limit any liability that may not by applicable law be excluded or limited, including without limitation (as applicable), any liability for death or personal injury to the extent that such injury results from the negligence or willful default of itself, its servants, agents or sub contractors. Any use of or access to products, services or information of MSCI requires a license from MSCI. MSCI, Barra, RiskMetrics, ISS, CFRA, FEA, EAFE, Aegis, Cosmos, BarraOne, and all other MSCI product names are the trademarks, registered trademarks, or service marks of MSCI in the United States and other jurisdictions. The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and Standard & Poor s. Global Industry Classification Standard (GICS) is a service mark of MSCI and Standard & Poor s. About MSCI MSCI Inc. is a leading provider of investment decision support tools to investors globally, including asset managers, banks, hedge funds and pension funds. MSCI products and services include indices, portfolio risk and performance analytics, and governance tools. The company s flagship product offerings are: the MSCI indices with approximately USD 7 trillion estimated to be benchmarked to them on a worldwide basis 1 ; Barra multi asset class factor models, portfolio risk and performance analytics; RiskMetrics multi asset class market and credit risk analytics; MSCI ESG (environmental, social and governance) Research screening, analysis and ratings; ISS governance research and outsourced proxy voting and reporting services; FEA valuation models and risk management software for the energy and commodities markets; and CFRA forensic accounting risk research, legal/regulatory risk assessment, and due diligence. MSCI is headquartered in New York, with research and commercial offices around the world. 1 As of June 30, 2011, based on evestment, Lipper and Bloomberg data. Please refer to the disclaimer at the end of this document 10 of 10

MSCI Short and Leveraged Daily Indices Methodology

MSCI Short and Leveraged Daily Indices Methodology MSCI Short and Leveraged Daily Indices Methodology Please refer to the disclaimer at the end of this document 1 of 7 1. INTRODUCTION The MSCI Short and Leveraged Daily Indices aim to replicate the payoff

More information

Global Investing: The Importance of Currency Returns and Currency Hedging

Global Investing: The Importance of Currency Returns and Currency Hedging Global Investing: The Importance of Currency Returns and Currency Hedging There is a continuing trend for investors to reduce their home bias in equity allocation and increase the allocation to international

More information

MSCI Global Minimum Volatility Indices Methodology

MSCI Global Minimum Volatility Indices Methodology MSCI Global Minimum Volatility Indices Methodology Table of Contents Section 1: Introduction... 3 Section 2: Characteristics of MSCI Minimum Volatility Indices... 3 Section 3: Constructing the MSCI Minimum

More information

Market Insight: Analyzing Hedges for Liability-Driven Investors

Market Insight: Analyzing Hedges for Liability-Driven Investors Market Insight: Lisa R. Goldberg and Sang-Hoon Kim Abstract: Managing surplus risk enables pension plans and endowments to align their asset allocations with their future obligations. BarraOne s Correlation

More information

Risk and Return of Factor Portfolios: The Impact of Regression Weighting

Risk and Return of Factor Portfolios: The Impact of Regression Weighting : The Impact of Regression Weighting Jose Menchero and Zoltán Nagy Jose.Menchero@ Zoltan.Nagy@ Introduction Factor portfolios are long short portfolios that have a unit exposure to a selected style factor

More information

Update on MSCI Equal Weighted Indices

Update on MSCI Equal Weighted Indices Introduction Update on MSCI Equal Weighted Indices Market capitalization weighted benchmarks are used for different purposes in the investment process, such as research, asset allocation, performance benchmarking,

More information

MSCI Global ESG Indices Methodology

MSCI Global ESG Indices Methodology Methodology 1. Introduction The are free float-adjusted market capitalization weighted indices designed to provide exposure to companies that have high Environmental, Social and Governance (ESG) performance.

More information

Analyzing Market Response Using the Barra US Equity Model. Jyh Huei Lee, Jose Menchero, Frank Vallario. msci.com

Analyzing Market Response Using the Barra US Equity Model. Jyh Huei Lee, Jose Menchero, Frank Vallario. msci.com US Market Report The on the US Equity Market Analyzing Market Response Using the Barra US Equity Model Jyh Huei Lee, Jose Menchero, Frank Vallario Introduction On May 1, 2013, the Federal Reserve announced

More information

Updated Stress Testing Features in RiskMetrics RiskManager

Updated Stress Testing Features in RiskMetrics RiskManager Updated Stress Testing Features in RiskMetrics RiskManager Predictive Stress Test for the 2009 Equity Market Rally. Audrey Costabile Christopher Finger Katarzyna Siudek 1 (Marie Curie Fellow) December

More information

Introducing the Loan Pool Specific Factor in CreditManager

Introducing the Loan Pool Specific Factor in CreditManager Technical Note Introducing the Loan Pool Specific Factor in CreditManager A New Tool for Decorrelating Loan Pools Driven by the Same Market Factor Attila Agod, András Bohák, Tamás Mátrai Attila.Agod@ Andras.Bohak@

More information

MSCI CHINA AND USA INTERNET TOP 50 EQUAL WEIGHTED INDEX

MSCI CHINA AND USA INTERNET TOP 50 EQUAL WEIGHTED INDEX INDEX METHODOLOGY MSCI CHINA AND USA INTERNET TOP 50 EQUAL WEIGHTED INDEX September 2014 SEPTEMBER 2014 CONTENTS 1 Introduction... 3 2 Constructing the MSCI China and USA Internet Top 50 Equal Weighted

More information

How European is Europe?

How European is Europe? Research Bulletin The ongoing sovereign debt crisis in Europe coupled with political uncertainty has pushed Europe into a deep recession posing enormous challenges not just for countries but also companies.

More information

MSCI Quality Indices Methodology

MSCI Quality Indices Methodology Methodology Contents Contents... 2 Section 1: Introduction... 3 Section 2: Index Construction Methodology... 4 Section 2.1: Applicable Universe... 4 Section 2.2: Determination of Quality Score... 4 Section

More information

MSCI Dividend Masters Indexes Methodology

MSCI Dividend Masters Indexes Methodology Index Methodology MSCI es Methodology July 2014 msci.com Contents 1 Introduction... 3 2 Index Construction Methodology... 3 Section 2.1: Applicable Universe... 3 Section 2.2: Security Selection... 3 Section

More information

MSCI AUSTRALIA SELECT HIGH DIVIDEND YIELD INDEX

MSCI AUSTRALIA SELECT HIGH DIVIDEND YIELD INDEX INDEX METHODOLOGY MSCI AUSTRALIA SELECT HIGH DIVIDEND YIELD INDEX March 2014 MARCH 2014 CONTENTS 1 Introduction... 3 2 Constructing the MSCI Australia Select High Dividend Yield Index... 4 3 Maintaining

More information

GDP Weighting in Asset Allocation February 2010

GDP Weighting in Asset Allocation February 2010 GDP Weighting in Asset Allocation Introduction The country factor is an important driver of equity market returns. A traditional passive approach for capturing this factor has been through market capitalization

More information

CURRENCY HEDGED INDEXES

CURRENCY HEDGED INDEXES INVESTOR INSIGHT CURRENCY HEDGED INDEXES Why Do They Matter? March 2015 CURRENCY HEDGED INDEXES Currency exposure has substantially impacted the performance and the volatility of global equity indexes

More information

Updated Stress Testing Features in RiskMetrics

Updated Stress Testing Features in RiskMetrics Updated Stress Testing Features in RiskMetrics RiskManager Historical Scenarios for Fall 2008, Treatment of Yield Curve Shocks, and a Hectic Day Risk Setting Introduction MSCI has updated RiskMetrics RiskManager

More information

MSCI Core Infrastructure Indexes Methodology

MSCI Core Infrastructure Indexes Methodology Index Methodology MSCI Core Infrastructure Indexes Methodology January 2015 msci.com Contents 1 Introduction... 3 2 Constructing MSCI Core Infrastructure Indexes... 3 2.1 Country and Constituent Selection...

More information

Reclassification Proposal for the MSCI Pakistan Index. February 2009

Reclassification Proposal for the MSCI Pakistan Index. February 2009 Consultation on the Market Reclassification Proposal for the MSCI Pakistan Index February 2009 Outline Introduction Proposal & Potential Implementation Timeline Appendix 2 Introduction 3 Objectives The

More information

Introduction. msci.com

Introduction. msci.com Research Bulletin Reporting with Fair Value Adjusted Indexes! Introducing the New Introduction Nearly all U.S.-domiciled international equity mutual funds use fair value methodologies to adjust their daily

More information

INDEX METHODOLOGY MSCI REIT PREFERRED. Index Construction and Maintenance Methodology for the MSCI REIT Preferred Index.

INDEX METHODOLOGY MSCI REIT PREFERRED. Index Construction and Maintenance Methodology for the MSCI REIT Preferred Index. INDEX METHODOLOGY MSCI REIT PREFERRED INDEX METHODOLOGY Index Construction and Maintenance Methodology for the MSCI REIT Preferred Index December 2014 DECEMBER 2014 CONTENTS 1 Introduction... 3 2 Defining

More information

MSCI PRIVATE ASSET INVESTMENT CONFERENCE

MSCI PRIVATE ASSET INVESTMENT CONFERENCE MSCI PRIVATE ASSET INVESTMENT CONFERENCE Jun 30, 2015 Tokyo MSCI is pleased to invite you to the MSCI Private Asset Investment Conference which is widely reputed as the prime real estate investment event

More information

Market Reclassification Implementation Q&A

Market Reclassification Implementation Q&A Market Reclassification Implementation Q&A On June 11, 2013 MSCI announced the results of the 2013 Annual Market Classification Review. The purpose of this document is to address commonly asked questions

More information

MSCI Global Socially Responsible Indices Methodology

MSCI Global Socially Responsible Indices Methodology MSCI Global Socially Responsible Indices Methodology 1. Introduction Globally, investors are increasingly seeking to invest in accordance with their values such as religious beliefs, moral standards, or

More information

MSCI Announces the Results of the 2011 Annual Market Classification Review

MSCI Announces the Results of the 2011 Annual Market Classification Review MSCI Announces the Results of the 2011 Annual Market Classification Review Geneva June 21, 2011 MSCI Inc. (NYSE: MSCI), a leading provider of investment decision support tools worldwide, including indices,

More information

ESG and Fixed Income Investing

ESG and Fixed Income Investing ESG and Fixed Income Investing ESG and Fixed Income Investing Laura Nishikawa, Head of ESG Fixed Income Research CSR Investing Summit New York, NY 22 July 2014 3 Introducing MSCI ESG Research ESG ratings

More information

A New Generation of Equity Factor Risk Models

A New Generation of Equity Factor Risk Models A New Generation of Equity Factor Risk Models Improvements for Portfolio Construction, Risk Control and Attribution March 2012 Changing Risk Landscape and Priorities for Risk Management Increasing volatility

More information

MSCI BUYBACK YIELD INDEXES METHODOLOGY

MSCI BUYBACK YIELD INDEXES METHODOLOGY INDEX METHODOLOGY MSCI BUYBACK YIELD INDEXES METHODOLOGY Mrig, Lokesh June 2015 JUNE 2015 CONTENTS 1 Introduction... 3 2 Index Construction Methodology... 4 2.1 Applicable Universe... 4 2.2 Determining

More information

Multi-Asset Class Market Report: Hedging the Risk of $200 per Barrel

Multi-Asset Class Market Report: Hedging the Risk of $200 per Barrel Multi-Asset Class Market Report: Hedging the Risk of $200 per Barrel Audrey Costabile and Zita Marossy Introduction Investors who believe that oil will not hit $200 per barrel may position themselves to

More information

The Stock-Bond Relationship and.asset Allocation October 2009

The Stock-Bond Relationship and.asset Allocation October 2009 The Stock-Bond Relationship and.asset Allocation October 2009 The relationship between stocks and bonds has important implications for asset allocation and risk diversification. This Research Bulletin

More information

Why Currency Returns and Currency Hedging Matters

Why Currency Returns and Currency Hedging Matters Research Insight Why Currency Returns and Currency Hedging Matters An Update on the MSCI Hedged Indices Jennifer Bender, Roman Kouzmenko, and Zoltan Nagy msci.com Overview With the growth of international

More information

MSCI HEDGED INDEXES MSCI DAILY HEDGED INDEXES MSCI FX HEDGE INDEXES MSCI GLOBAL CURRENCY INDEXES

MSCI HEDGED INDEXES MSCI DAILY HEDGED INDEXES MSCI FX HEDGE INDEXES MSCI GLOBAL CURRENCY INDEXES INDEX METHODOLOGY MSCI HEDGED INDEXES MSCI GLOBAL CURRENCY INDEXES July 2013 JULY 2013 CONTENTS Introduction... 5 1 Common Principles in the Calculation of MSCI Hedged, MSCI Daily Hedged, MSCI FX Hedge

More information

MSCI Risk Monitor: RiskMetrics Europe

MSCI Risk Monitor: RiskMetrics Europe April 5 Volatility and Correlation for Key Risk Drivers in Europe About This Report Highlights Under a standard RiskMetrics forecasting model, this monthly Risk Monitor reports on the evolution of risk

More information

Introduction to RiskMetrics WealthBench

Introduction to RiskMetrics WealthBench Introduction to RiskMetrics WealthBench RiskMetrics WealthBench WealthBench is a web based platform used by relationship managers and investment advisors in their investment planning processes to help

More information

S&P DOW JONES INDICES AND MSCI ANNOUNCE REVISIONS TO THE GLOBAL INDUSTRY CLASSIFICATION STANDARD (GICS ) STRUCTURE IN 2016

S&P DOW JONES INDICES AND MSCI ANNOUNCE REVISIONS TO THE GLOBAL INDUSTRY CLASSIFICATION STANDARD (GICS ) STRUCTURE IN 2016 S&P DOW JONES INDICES AND MSCI ANNOUNCE REVISIONS TO THE GLOBAL INDUSTRY CLASSIFICATION STANDARD (GICS ) STRUCTURE IN 2016 New York, November 10, 2014 - S&P Dow Jones Indices, a leading provider of financial

More information

MSCI Risk Monitor: RiskMetrics Europe

MSCI Risk Monitor: RiskMetrics Europe MSCI Risk Monitor: RiskMetrics Europe June 216 Volatility and Correlation for Key Risk Drivers in Europe About This Report Highlights Under a standard RiskMetrics forecasting model, this monthly Risk Monitor

More information

Impact of Yen on Japanese Stocks

Impact of Yen on Japanese Stocks David T. Owyong, PhD This paper considers the changing value of the yen and its impact on the Japanese stock market during the last three decades, and we examine how this currency sensitivity varied substantially

More information

MSCI CORE REAL ESTATE INDEXES METHODOLOGY

MSCI CORE REAL ESTATE INDEXES METHODOLOGY INDEX METHODOLOGY MSCI CORE REAL ESTATE INDEXES METHODOLOGY Index Construction and Maintenance Methodology for the MSCI Core Real Estate Indexes July 2016 JULY 2016 CONTENTS 1 Introduction... 3 2 Eligible

More information

Frequently Asked Questions MSCI ESG RESEARCH. FAQs for the Corporate Community October 2014. msci.com

Frequently Asked Questions MSCI ESG RESEARCH. FAQs for the Corporate Community October 2014. msci.com Frequently Asked Questions MSCI ESG RESEARCH for the Corporate Community MSCI ESG RESEARCH Frequently Asked Questions General: What is MSCI? MSCI is a leading provider of investment decision support tools

More information

New York, May 15, 2013. MSCI US Equity Indices

New York, May 15, 2013. MSCI US Equity Indices New York, May 15, 2013 MSCI US Equity Indices The following are changes in constituents for the MSCI US Equity Indices which will take place as of the close of May 31, 2013. SUMMARY OF THE CHANGES INCLUDED

More information

Results of MSCI 2015 Market Classification Review

Results of MSCI 2015 Market Classification Review Results of MSCI 2015 Market Classification Review China A Shares on Track for Inclusion MSCI and CSRC Will Form Working Group to Address Remaining Issues Geneva June 9, 2015 MSCI Inc. (NYSE: MSCI), the

More information

MSCI Announces Market Classification Decisions

MSCI Announces Market Classification Decisions MSCI Announces Market Classification Decisions Geneva - June 15, 2009 - MSCI Inc. (NYSE: MXB), a leading provider of investment decision support tools worldwide, including indices and portfolio risk and

More information

MSCI DIVERSIFIED MULTIPLE-FACTOR INDEXES METHODOLOGY

MSCI DIVERSIFIED MULTIPLE-FACTOR INDEXES METHODOLOGY INDEX METHODOLOGY MSCI DIVERSIFIED MULTIPLE-FACTOR INDEXES METHODOLOGY October 2015 APRIL 2015 CONTENTS 1 Introduction... 3 2 Index Construction Methodology... 4 2.1 Applicable Universe... 4 2.2 Constituent

More information

MSCI Announces Results of the 2014 Annual Market Classification Review

MSCI Announces Results of the 2014 Annual Market Classification Review MSCI Announces Results of the 2014 Annual Market Classification Review Geneva June 10, 2014 MSCI Inc. (NYSE: MSCI), a leading provider of indexes and other investment decision support tools worldwide,

More information

MSCI Announces the Results of the 2012 Annual Market Classification Review

MSCI Announces the Results of the 2012 Annual Market Classification Review MSCI Announces the Results of the 2012 Annual Market Classification Review Geneva June 20, 2012 MSCI Inc. (NYSE: MSCI), a leading provider of investment decision support tools worldwide, including indices,

More information

Risk Characteristics of Emerging Market Bonds

Risk Characteristics of Emerging Market Bonds www.mscibarra.com Risk Characteristics of Emerging Market Bonds March 2010 David T. Owyong, PhD Anand S. Iyer, CFA 2010 MSCI Barra. All rights reserved. In 2009, emerging market bonds were among the top-performing

More information

RESULTS OF MSCI 2016 MARKET CLASSIFICATION REVIEW

RESULTS OF MSCI 2016 MARKET CLASSIFICATION REVIEW RESULTS OF MSCI 2016 MARKET CLASSIFICATION REVIEW MSCI will delay including China A shares in the MSCI Emerging Markets Index New York June 14, 2016 MSCI Inc. (NYSE: MSCI), a leading provider of global

More information

Is There a Link Between GDP Growth and Equity Returns? May 2010

Is There a Link Between GDP Growth and Equity Returns? May 2010 Is There a Link Between GDP Growth and Equity Introduction A recurring question in finance concerns the relationship between economic growth and stock market return. Recently, for example, some emerging

More information

MSCI Risk Monitor: RiskMetrics Europe

MSCI Risk Monitor: RiskMetrics Europe MSCI Risk Monitor: RiskMetrics Europe October 15 Volatility and Correlation for Key Risk Drivers in Europe About This Report Highlights Under a standard RiskMetrics forecasting model, this monthly Risk

More information

Germany Real Estate Market Overview

Germany Real Estate Market Overview Germany Real Estate Market Overview 9 th April 2015 Peter Hobbs, Real Estate Research, MSCI 2014 MSCI Inc. All rights reserved. Agenda 1. German real estate in a global context 2. Variations within Germany

More information

Value-Growth Dynamics in Interest Rate Cycles May 2008

Value-Growth Dynamics in Interest Rate Cycles May 2008 Value-Growth Dynamics in Interest Rate Cycles Overview A slowing economy has renewed interest in the impact of interest rates, inflation, and monetary policy on equity markets. Intuitively, a case can

More information

S&P DOW JONES INDICES AND MSCI ANNOUNCE FURTHER REVISIONS TO THE GLOBAL INDUSTRY CLASSIFICATION STANDARD (GICS ) STRUCTURE IN 2016

S&P DOW JONES INDICES AND MSCI ANNOUNCE FURTHER REVISIONS TO THE GLOBAL INDUSTRY CLASSIFICATION STANDARD (GICS ) STRUCTURE IN 2016 S&P DOW JONES INDICES AND MSCI ANNOUNCE FURTHER REVISIONS TO THE GLOBAL INDUSTRY CLASSIFICATION STANDARD (GICS ) STRUCTURE IN 2016 New York, November 2, 2015 - S&P Dow Jones Indices, a leading provider

More information

Are we living in a Bond Bubble? Oliver Sinnott Fixed Income Strategist April 2014

Are we living in a Bond Bubble? Oliver Sinnott Fixed Income Strategist April 2014 Are we living in a Bond Bubble? Oliver Sinnott Fixed Income Strategist April 2014 Global Financial Crisis saw debt levels soar to highest since WWII Governments were too highly indebted to significantly

More information

MSCI Announces European Property Investment Award Winners

MSCI Announces European Property Investment Award Winners MSCI Announces European Property Investment Award Winners London November 22, 2016 - MSCI Inc. (NYSE: MSCI), a leading provider of portfolio construction and risk management tools for global investors,

More information

MSCI US REIT Index Methodology

MSCI US REIT Index Methodology Index Construction and Maintenance Methodology for the MSCI US REIT Index 1. Introduction The MSCI US REIT Index is a free float market capitalization weighted index that is comprised of Equity REITs securities

More information

FRANKLIN GLOBAL EQUITY INDEX

FRANKLIN GLOBAL EQUITY INDEX INDEX METHODOLOGY FRANKLIN GLOBAL EQUITY INDEX Mrig, Lokesh April 2016 APRIL 2016 CONTENTS 1 Introduction... 3 2 Index Construction Methodology... 4 2.1 Defining The Eligible Universe... 4 2.2 Determination

More information

Consultation on a proposal to create

Consultation on a proposal to create Consultation on a proposal to create MSCI Global l Socially Responsible Indices February 2011 2011. All rights reserved. msci.com Outline Introduction Proposed MSCI Global Socially Responsible Indices:

More information

S&P 500 Composite (Adjusted for Inflation)

S&P 500 Composite (Adjusted for Inflation) 12/31/1820 03/31/1824 06/30/1827 09/30/1830 12/31/1833 03/31/1837 06/30/1840 09/30/1843 12/31/1846 03/31/1850 06/30/1853 09/30/1856 12/31/1859 03/31/1863 06/30/1866 09/30/1869 12/31/1872 03/31/1876 06/30/1879

More information

Responding to the Call for Fossil-fuel Free Portfolios

Responding to the Call for Fossil-fuel Free Portfolios FAQ Updated Responding to the Call for Fossil-fuel Free Portfolios What is fossil-free investing? Students, faculty and elected officials are asking college endowments and municipal and state pension funds

More information

Minimum Volatility Equity Indexes

Minimum Volatility Equity Indexes Minimum Volatility Equity Indexes Potential Tools for the Insurance Company November 2013 Overview Insurers looking for greater risk-adjusted returns from their portfolios often consider minimum volatility

More information

BlackRock Launches Retirement Income Indexes

BlackRock Launches Retirement Income Indexes BlackRock Launches Retirement Income Indexes Groundbreaking Indexes Give Investors Metric to Translate Retirement Savings into Retirement Income; Enables Better Planning, Midcourse Corrections During Critical

More information

CONSULTATION ON POTENTIAL CHANGES TO THE GLOBAL INDUSTRY CLASSIFICATION STANDARD (GICS ) STRUCTURE IN 2016

CONSULTATION ON POTENTIAL CHANGES TO THE GLOBAL INDUSTRY CLASSIFICATION STANDARD (GICS ) STRUCTURE IN 2016 CONSULTATION ON POTENTIAL CHANGES TO THE GLOBAL INDUSTRY CLASSIFICATION STANDARD (GICS ) STRUCTURE IN 2016 June 1, 2015 TABLE OF CONTENTS 1. Introduction 2. Mode of consultation 3. The evolution of the

More information

Fixed Income Focus: Ireland & Portugal

Fixed Income Focus: Ireland & Portugal In the past decade we have seen droves of investors driven to global fixed income markets in search of higher yields. While the global pool of fixed income securities more than doubled, we saw asset bubbles

More information

CONSULTATION ON CHINA A-SHARES INDEX INCLUSION ROADMAP

CONSULTATION ON CHINA A-SHARES INDEX INCLUSION ROADMAP CONSULTATION ON CHINA A-SHARES INDEX INCLUSION ROADMAP Updated Post 2015 MSCI Market Classification Review April 2016 2016 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this

More information

Director of Research of WisdomTree Europe

Director of Research of WisdomTree Europe Author Viktor Nossek Director of Research of WisdomTree Europe Viktor, who has over 13 years experience in research, joined WisdomTree from Renaissance Asset Managers where he was Head of Research. Viktor

More information

INDEXES INDEX DEFINITIONS. Index Marketing. February 2015

INDEXES INDEX DEFINITIONS. Index Marketing. February 2015 INDEXES INDEX DEFINITIONS Index Marketing February 2015 FEBRUARY 2015 CONTENTS MSCI Regional Equity Indexes... 3 MSCI Index Variants... 7 Definition of Terms for MSCI Indexes... 9 MSCI.COM PAGE 2 OF 12

More information

Define your goals, we ll do the rest

Define your goals, we ll do the rest SUB-FUNDS OF GOLDMAN SACHS FUNDS, SICAV Define your goals, we ll do the rest The GS Wealthbuilder Multi-Asset Portfolios can help you achieve your goals, whether you are looking to preserve, enhance or

More information

PROTECTING YOUR PORTFOLIO WITH BONDS

PROTECTING YOUR PORTFOLIO WITH BONDS Your Global Investment Authority PROTECTING YOUR PORTFOLIO WITH BONDS Bond strategies for an evolving market Market uncertainty has left many investors wondering how to protect their portfolios during

More information

IPD GLOBAL QUARTERLY PROPERTY FUND INDEX

IPD GLOBAL QUARTERLY PROPERTY FUND INDEX IPD GLOBAL QUARTERLY PROPERTY FUND INDEX Contributing Managers and Funds March 2015 MARCH 2015 CONTRIBUTING MANAGERS AND FUNDS MARCH 2015 Asia Pacific Management House AMP Capital Investors AMP Capital

More information

Foreign Exchange Investments Discover the World of Currencies. Private Banking USA

Foreign Exchange Investments Discover the World of Currencies. Private Banking USA Foreign Exchange Investments Discover the World of Currencies Credit Suisse Securities (USA) llc Private Banking USA 2 Foreign exchange: There s no ignoring the largest market in the world. Introduction

More information

Why ECB QE is Negative for Commodities. Investment Research & Advisory. Deltec International Group

Why ECB QE is Negative for Commodities. Investment Research & Advisory. Deltec International Group Atul Lele alele@deltecinv.com +1 242 302 4135 David Munoz dmunoz@deltecinv.com +1 242 302 4106 David Frazer dfrazer@deltecinv.com +1 242 302 4156 Why ECB QE is Negative for Commodities Recent ECB Quantitative

More information

Revisiting Global Small Caps

Revisiting Global Small Caps Revisiting Global Small Caps July 2010 Marc Kilbert Raman Aylur Subramanian 2010 MSCI. All rights reserved. 1 of 20 Summary The small cap as a source of equity risk premia has been well documented in finance

More information

INDEX SERIES FTSE PUBLICATIONS. FTSE ETF Issuer Services.

INDEX SERIES FTSE PUBLICATIONS. FTSE ETF Issuer Services. INDEX SERIES FTSE PUBLICATIONS FTSE ETF Issuer Services. BEIJING BOSTON DUBAI HONG KONG LONDON MILAN MUMBAI NEW YORK PARIS SAN FRANCISCO SHANGHAI SYDNEY TOKYO FTSE FTSE Group ( FTSE ) is a world-leader

More information

Dynamic Foreign Exchange Risk Management Strategies

Dynamic Foreign Exchange Risk Management Strategies Dynamic Foreign Exchange Risk Management Strategies February 2009 Expanding was the least we could do to connect you to the major world markets Philippe DELMOTTE Head of FX Sales Europe Daniel TARJANYI

More information

MSCI US REIT Index Methodology

MSCI US REIT Index Methodology Index Construction and Maintenance Methodology for the MSCI US REIT Index Contents Introduction... 3 Section 1: Defining REITs and the MSCI US REIT Index Eligible REITs... 4 Section 2: Free Float-Adjusting

More information

And this flight to safety is also evidenced in the G3 sovereign bond markets where long bond yields of Germany, Japan and US declined sharply in

And this flight to safety is also evidenced in the G3 sovereign bond markets where long bond yields of Germany, Japan and US declined sharply in The New Year started on a choppy note for global capital markets as a couple of Black Swan events buffeted risky assets globally. The rapid technical break-down of Crude Oil and Copper followed by the

More information

Impact of QE on Fixed Income

Impact of QE on Fixed Income Impact of QE on Fixed Income David Greene, Client Portfolio Manager Pioneer Investments Unconstrained Approaches Potential returns mean investors have to be more opportunistic 5 0 Expected return based

More information

The Credit Crisis: A Monetary Explanation

The Credit Crisis: A Monetary Explanation M O R G A N S T A N L E Y R E S E A R C H Global Economics The Credit Crisis: A Monetary Explanation Joachim Fels Chief Global Fixed Income Economist & Co-Head of Global Economics 33 rd Annual IOSCO Conference

More information

Can Tail Risk Be Hedged?

Can Tail Risk Be Hedged? Can Tail Risk Be Hedged? Summary of Empirical Results Lisa R. Goldberg Ola Mahmoud (Marie Curie Fellow) 1 Peter Shepard Kurt Winkelmann August 2011 1 Ola Mahmoud was a Marie Curie Fellows at MSCI. The

More information

Introductory remarks by Jean-Pierre Danthine

Introductory remarks by Jean-Pierre Danthine abcdefg News conference Berne, 15 December 2011 Introductory remarks by Jean-Pierre Danthine I would like to address three main issues today. These are the acute market volatility experienced this summer,

More information

Actuarial and Insurance Solutions Financial Market Analysis at endyear

Actuarial and Insurance Solutions Financial Market Analysis at endyear Actuarial and Insurance Solutions Financial Market Analysis at endyear 2014 15 th January 2015 Audit. Tax. Consulting. Corporate Finance. Contents Executive Summary 1 1 Interest Rates 2 2 Equity Markets

More information

Demand for RMB and Financial Services through Hong Kong by German Businesses

Demand for RMB and Financial Services through Hong Kong by German Businesses Demand for RMB and Financial Services through Hong Kong by German Businesses Think Asia, Think Hong Kong Munich, 11 September 2014 Think Asia, Think Hong Kong Munich, 11 September 2014 Page 1 Asia: Key

More information

Factoring in the Emerging Markets Premium

Factoring in the Emerging Markets Premium Factoring in the Emerging Markets Premium Exploring Factor Indexes in Emerging Markets Raina Oberoi Raman Aylur Subramanian Anil Rao Philippe Durand Contents Contents... 2 Executive Summary... 3 I. Emerging

More information

QE, Credit Markets and Bubbles

QE, Credit Markets and Bubbles Spring 2014 QE, Credit Markets and Bubbles David Zervos Chief Market Strategist dzervos@jefferies.com +1 212 323 7586 US Monetary Base 4.5 4 3.5 QE3 3 Trillion USD 2.5 2 QE2 1.5 QE1 1 0.5 Operation Twist

More information

db x-trackers MSCI World Telecom Services Index UCITS ETF (DR) Supplement to the Prospectus

db x-trackers MSCI World Telecom Services Index UCITS ETF (DR) Supplement to the Prospectus db x-trackers MSCI World Telecom Services Index UCITS ETF (DR) Supplement to the Prospectus This Supplement contains information in relation to the db x-trackers MSCI World Telecom Services Index UCITS

More information

Japanese bonds in a negative interest rate environment

Japanese bonds in a negative interest rate environment Japanese bonds in a negative interest rate environment On January 29, 2016, the Bank of Japan (BoJ) introduced "Quantitative and Qualitative Monetary Easing with Negative Interest Rate". The decision initiated

More information

Nikko Asset Management to List Currency Hedged and Non-Hedged US Bond ETFs

Nikko Asset Management to List Currency Hedged and Non-Hedged US Bond ETFs PRESS RELEASE AUGUST 10, 2016 NIKKO ASSET MANAGEMENT CO., LTD. Nikko Asset Management to List Currency Hedged and Non-Hedged US Bond ETFs Listed Index Fund US Bond (Currency Hedge) / (No Currency Hedge)

More information

EMPLOYING IMPLIED VOLATILITY TO IMPROVE SHORT-TERM RISK FORECASTS OF EQUITY MODELS

EMPLOYING IMPLIED VOLATILITY TO IMPROVE SHORT-TERM RISK FORECASTS OF EQUITY MODELS EMPLOYING IMPLIED VOLATILITY TO IMPROVE SHORT-TERM RISK FORECASTS OF EQUITY MODELS "Successful investing is anticipating the anticipations of others." - John Maynard Keynes Igor Mashtaler Nicolas Meng

More information

What s Ahead for the Markets and the Economy? Prof. Jeremy J. Siegel ~ The Wharton School CoBank Executive Forum ~ August 23, 2012

What s Ahead for the Markets and the Economy? Prof. Jeremy J. Siegel ~ The Wharton School CoBank Executive Forum ~ August 23, 2012 What s Ahead for the Markets and the Economy? Prof. Jeremy J. Siegel ~ The Wharton School CoBank Executive Forum ~ August 23, 2012 Important Information This presentation represents the opinion of Jeremy

More information

Nikko Asset Management Launches Japan High-Dividend Low-Volatility Smart Beta ETF

Nikko Asset Management Launches Japan High-Dividend Low-Volatility Smart Beta ETF Press Release November 11, 2015 Nikko Asset Management Launches Japan High-Dividend Low-Volatility Smart Beta ETF Listed Index Fund MSCI Japan Equity High Dividend Low Volatility to debut on TSE on Dec

More information

JB Certificates and Warrants on Interest Rates in EUR, USD and CHF

JB Certificates and Warrants on Interest Rates in EUR, USD and CHF JB Certificates and Warrants on Interest Rates in EUR, USD and CHF Efficient instruments to hedge bonds, mortgages and lombard loans against rising interest rates Zurich, 2013 Content Table Embedded risks

More information

Credit Suisse Asset Management Headline Ideas 2015 Dividends An Important Source of Income When Interest Rates Are Low. For qualified investors only

Credit Suisse Asset Management Headline Ideas 2015 Dividends An Important Source of Income When Interest Rates Are Low. For qualified investors only Credit Suisse Asset Headline Ideas 2015 Dividends An Important Source of Income When Interest Rates Are Low For qualified investors only Dividends An Important Source of Income When Interest Rates Are

More information

FX Strategies. In the Low Yield Environment. Eddie Wang Head of FX Structuring, Asia. Hong Kong October 2010

FX Strategies. In the Low Yield Environment. Eddie Wang Head of FX Structuring, Asia. Hong Kong October 2010 FX Strategies In the Low Yield Environment Eddie Wang Head of FX Structuring, Asia Hong Kong October 2010 Contents 01 Key Trends 02 FX Hedging Strategies 03 FX Investment Strategies SECTION 01 Key Trends

More information

Liquidity Risk Management

Liquidity Risk Management Liquidity Risk Management New Trends, Challenges and Instruments for the Financial Industry 1 Outline MSCI liquidity risk research and current regulation LiquidityMetrics Overview Regulatory support Calibration

More information

Geneva, May 12, 2016 MSCI GLOBAL STANDARD INDEXES

Geneva, May 12, 2016 MSCI GLOBAL STANDARD INDEXES Geneva, May 12, 2016 MSCI GLOBAL STANDARD INDEXES The following are changes in constituents for the MSCI Global Standard Indexes which will take place as of the close of May 31, 2016. SUMMARY PER COUNTRY

More information

Laddering a Portfolio of Municipal Bonds

Laddering a Portfolio of Municipal Bonds CONTRIBUTORS J.R. Rieger Global Head Fixed Income Indices james.rieger@spdji.com Tyler Cling Senior Manager Fixed Income Indices tyler.cling@spdji.com Bond laddering is a strategy that calls for maturity

More information

A Liquid Benchmark for Private Real Estate

A Liquid Benchmark for Private Real Estate A Liquid Benchmark for Private Real Estate Mark Clacy-Jones Roman Kouzmenko Bryan Reid Bert Teuben Contents Contents... 2 Executive Summary... 3 Introduction... 4 Private and Listed Real Estate Indexes...

More information

Seeking a More Efficient Fixed Income Portfolio with Asia Bonds

Seeking a More Efficient Fixed Income Portfolio with Asia Bonds Seeking a More Efficient Fixed Income Portfolio with Asia s Seeking a More Efficient Fixed Income Portfolio with Asia s Drawing upon different drivers for performance, Asia fixed income may improve risk-return

More information