Investment Committee – July 2024


Market Reflections

Current Market Environment and Investment Strategy

The Investment Committee convened this month to assess the prevailing market conditions and refine our investment strategy accordingly. The consensus was that the current environment remains favorable for a wide range of asset classes. In such a scenario, carry trades tend to perform well, benefiting from the steady stream of income generated over time. Additionally, equity investments characterized by low volatility often outperform.

Potential Risks and Market Observations

Despite the generally positive outlook, the Committee identified several factors that could potentially disrupt this benign environment.

Inverted Interest Rate Curve: The interest rate curve remains inverted, indicating that longer-term rates are not higher than short-term rates. This suggests that our investors are not adequately compensated for taking on additional risk.

Tight Spread of Corporate and Peripheral Sovereign Bonds: The spread between the performance of corporate and peripheral sovereign bonds compared to benchmark G7 government bonds is currently near its narrowest. This indicates that the returns are sub-optimal relative to the assumed investment risk.

High Cost of Hedging Fixed-Income Positions: Measures of the cost for hedging fixed-income positions, such as bond convexity and the volatility MOVE Index, are relatively high compared to stock market hedges. This increases the cost of managing risk in fixed-income portfolios.


Given these observations, the Committee recommends the following strategic adjustments:

Short Duration Fixed Income Securities: We suggest maintaining investments in short duration fixed income securities to minimize exposure to interest rate risk and to benefit from the current yield environment.

Preparation for Higher Volatility: It is advisable to prepare for potential higher volatility in the markets after the summer holidays. This may involve exploring methods to capitalize on volatility through strategic asset allocation and risk management techniques.

Asset Allocation for 2024

The debate of timing the markets versus maintaining consistent market participation remains pivotal. Most projections for 2024 have favored allocations to capture market carry, especially through fixed income, and recommended reducing exposure to “expensive equities.” However, portfolios that heavily relied on this strategy have encountered a “pain trade” due to the bond market’s underperformance this year. Conversely, equities, particularly those in the technology and AI sectors, have experienced significant gains.

This development underscores the importance of a balanced approach to asset allocation. Avoiding over-commitment to any single conviction and maintaining diversified market participation tends to yield better results. The key takeaway is that consistent engagement in the markets often proves more beneficial than attempting to perfectly time market entries and exits.


The Committee remains vigilant in monitoring market conditions and adjusting strategies to optimize returns while managing risks. Our focus will be on maintaining a balanced and diversified portfolio, with a keen eye on emerging opportunities and potential market shifts.

Authors: John Couletsis and Kostas Metaxas