Investment Committee – December 2023
A Strategic Review Amidst Market Rebounds
The Investment Committee met in December 2023 to build upon the strategic discussions from November and to assess new developments in the financial markets. The meeting was marked by a review of the recent market rebounds, the introduction of a new volatility product offering, and a deep dive into the investment opportunities in Greece.
Market Developments and Investment Posture
The Committee noted the considerable rebound in both bond and stock prices during November, with supportive flows expected to continue into year-end. The US Dollar’s trajectory remains a key barometer for risk appetite, and the Committee is closely monitoring its movements. Despite the challenges faced by higher duration strategies throughout the year, there is a growing sentiment that the October dip may have established a significant bottom. With the Federal Reserve’s implied probabilities suggesting a series of interest rate cuts in 2024, client interest in fixed income has surged, driven by a fear of missing out on potential rallies. Consequently, many mandates are reverting to a focus on longer-duration investments.
Introduction of VolatilityEdge
The Committee is pleased to announce the launch of VolatilityEdge, a new product designed to capitalize on mispricings in volatility derivatives. Implemented by Mr. Antonis Tsompopoulos, this systematic relative value strategy trades on the S&P 500 implied volatility, employing various spreads in VIX futures and options, as well as S&P futures and options, to exploit market inefficiencies. The Committee believes that VolatilityEdge will offer clients a sophisticated tool to enhance their portfolios, particularly in the current market environment where volatility plays a significant role.
Investment Opportunities in Greece
Mr. Kostas Asimakopoulos from our team has conducted a thorough analysis of the Greek economy and its investment landscape. Greece’s real GDP growth for 2023 is projected to surpass the Eurozone average, with key macroeconomic indicators such as the Government Budget Balance and Primary Balance exceeding expectations. This positive momentum is expected to continue into 2024 and 2025. The Greek sovereign debt is on the path to achieving investment-grade ratings, which is crucial for ECB bond-buying program eligibility. The Greek equity market, particularly the banking sector, is showing signs of recovery and is increasingly attracting institutional investors. However, the Committee remains cautious of global economic downturns and domestic challenges that could impact growth.
Conclusions
The December meeting of the Investment Committee opted for a reactive approach to the evolving market conditions. The rebound in market prices has led to a shift in investment strategies, with a renewed interest in longer-duration assets. The introduction of VolatilityEdge represents the Committee’s commitment to providing innovative investment solutions. The analysis of the Greek investment landscape has uncovered promising opportunities, although vigilance is required given the potential risks. The Committee will continue to adapt its strategies to ensure robust portfolio performance and to capitalize on market opportunities as they arise.
Authors: John Couletsis, Kostas Metaxas, Antonis Tsompopoulos and Kostas Asimakopoulos