避风港对冲：多产业策略

1、Hedging with havens24 January 2019MULTI-ASSETGLOBALMulti-Asset StrategyLast year we saw unusual cross asset behaviour. This led many to ask if the characteristics of havens have changed.We would answer no, and went a step further to rank safe havens on a cross-asset basisThe champions are US Treasur

2、ies, JPY and gold, in that orderIt appears the days of historically low volatility are numbered. When vol rises, safe havens may act as an effective hedge when risk assets sell off. Yet, many such assets have failed to protect investors, most prominently USTs in early-18. We therefore putPierre Blan

3、chetHead of Multi-Asset Strategy HSBC Bank plc HYPERLINK mailto:pierre.blanchet pierre.blanchet+44 20 7991 5388Duncan TomsMulti-Asset Strategist HSBC Bank plc HYPERLINK mailto:duncan.toms duncan.toms+44 20 7991 3025Max KettnerMulti-Asset StrategistHSBC Bank plc HYPERLINK mailto:maximilian.l.kettner

4、maximilian.l.kettner+44 20 7991 5045safe havens through their paces to determine the best safe haven under higher vol. Our analysis focuses on simulating risk-return characteristics chart 1 is a scatter plot that includes 10 million simulations of various portfolio weightings. From this analysis we

5、find that short-end USTs are our safe haven champions. This is followed by the JPY in second place, and gold gets the bronze medal in third. Hence, despite short-end UST yields broadly rising as the Fed has hiked since 2017, it is clear that their safe- haven characteristics snap back during times o

6、f market turbulence. Additionally, USTs appear to be the best safe haven for EUR-based investors too. Meanwhile, we find the CHFs safe-haven status has significantly diminished during the last two years.Hedging risksIn HYPERLINK /R/10/vf9dvT9jvvqx Top 10 risks for 2019 we find investors top concerns

7、 were a Eurozone crisis 2.0and US corporate margins fall. USTs and the JPY can be used to hedge these risks.Ten million simulations for a basket of US equities, US Treasuries, and JPY-USDMaximum Risk-Return RatioSource: HSBC, BloombergDisclosures & DisclaimerThis report must be read with the disclos

8、ures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it.Issuer of report: HSBC Bank plcView HSBC Global Research at: HYPERLINK / Choosing a haven At a time of market turbulence and rising volatility, we revisit the concept of safe-haven assets

9、We simulate the risk-return characteristics of millions of portfolios to identify the best safe-haven asset We find short-dated US Treasuries to be better havens than the JPY, CHF or goldInvestors could be doubtful about the ability of sovereign bonds, and US Treasuries in particular, to protect por

10、tfolios after the moves weve seen in 2018. The correlation between bonds and equities is unstable (See HYPERLINK /R/10/vb7lSPjjvvqx Bond-equity correlation asymmetry, 16 July 2018) and can hurt multi-asset strategies rather than protect them. The USD bull run has also impacted the behaviour of other

11、 traditional safe havens like gold, JPY and CHF. Still, the sharp market moves in 2018 after a long period of low volatility have refocused investor attention on the need for safe-haven assets in multi-asset portfolios.Being a “safe haven” is an unstable property for an asset. Having a framework whi

12、ch enables us to choose safe-haven assets that fit the current market context might therefore be useful. In this section, we clarify the definition of safe haven, and identify candidates for this role. We use a mean variance approach to choose safe havens (details in the Appendix), and conclude that

13、 1-3Y USTs are the best safe haven for balanced portfolios in the current market context. This holds true for both USD- and EUR-based investors.Hedge or haven?There is sometimes a confusion between a hedge and a safe-haven asset. The reason is that certain safe-haven assets can be used as a hedge an

14、d vice versa under different circumstances. A safe-haven asset can be defined as an asset which holds or increases its value during periods of market turmoil and economic uncertainty.To be more precise: “A hedge is defined as an asset that is uncorrelated or negatively correlated with another asset

15、or a portfolio on average. A safe haven is defined as an asset that is uncorrelated or negatively correlated with another asset or portfolio in times of market stress or turmoil.” 1 A hedge and a safe haven are considered as “strong” when the correlation is negative and “weak” otherwise. Safe haven

16、is a property linked to certain circumstanceswhereas hedge is a sustained characteristic.Seeking shelter1 Is Gold a hedge or a safe haven? An analysis of stocks, bonds and gold, Dirk G. Baur and Brian M. Lucey, The FinancialReview (2010)The specific property of a safe haven is the non-positive corre

17、lation with a portfolio in extreme market conditionsBaur and Lucey, 20101A temporary propertyThe definition of safe haven highlights two important characteristics: its a relative relationship and a temporary property. An asset can be a safe haven during a certain period of time and then lose this ch

18、aracteristic. The circumstances which lead to extreme market conditions also have an impact. Investors are ambiguity averse2 and academic studies show that when they receive ambiguous signals during periods of market turmoil, gold is the preferred safe haven. When faced with extreme but unambiguous

19、signals, investors prefer US Treasuries3. Investor choice is therefore a function of the context of the sell-off. Hence the reason why we try toidentify safe-haven assets that suit the current market environment.The best safe haven in times of rising volatilityPhases of strong economic uncertainty a

20、nd market turmoil impact several risk assets with different magnitudes, which can be used as signals. We choose the US equities (S&P 500) as a classic risk asset in a balanced portfolio and the VIX as the signal to define phases of market stress. While cash can now be regarded as a haven for USD-bas

21、ed investors, for our analysis we focussed on a fully invested balanced portfolio which doesnt include money-market instruments.Typical safe havens include US Treasuries, the JPY, gold, and the CHF (see the Appendix for why we picked these assets). Over 2010-2016, many of these safe havens generated

22、 stronger returns when equity volatility was high. Charts 3-4 show that between 2010 and 2016, as the VIX rose, these safe havens performed better on a risk-adjusted basis through greater risk- return ratios, as well as higher hit ratios4.Risk return ratio conditional to VIX level over 2010-16Hit ra

23、tio conditional on VIX levels over 2010-163Source: HSBC, Refinitiv DatastreamSource: HSBC, Refinitiv DatastreamNote: data filtered for various levels of VIX 2010-2016; US Treasuries are calculated on a total return basis.Note: data filtered for various levels of VIX 2010-2016; US Treasuries are calc

24、ulated on a total return basis.At first glance, it may appear that short-end US Treasuries might not act as an effective safe haven anymore, as yields have crept higher in the last three years mainly as a consequence of the Fed hiking rates. Additionally, the historically low level of yield may limi

25、t the total return potential of treasuries during market turmoil.Ellsberg (1961) demonstrated that seemingly rational people tend to irrationally avoid ambiguity. Also known as theEllsberg Paradox.Safe haven assets and investors behaviour under uncertainty, Dirk G. Baur and Thomas K.J. McDermott, UT

26、S (2012) 4 The frequency with which assets generate a positive weekly returnHowever, in fact our analysis shows the opposite: a more recent period suggests that it is short-end USTs that stand out as one of the best safe havens. Charts 5-6 show that, since 2016, short-end USTs have had the highest r

27、isk-return ratios and highest hit ratios when the VIX rises. This is surprising given how short-end USTs have largely sold-off since 2017.Risk-return ratios since 20166. Hit ratios since 2016Source: HSBC, Refinitiv DatastreamSource: HSBC, Refinitiv DatastreamNote: data filtered for various levels of

28、 VIX since 2016; US Treasuries are calculated on a total return basis.Note: data filtered for various levels of VIX since 2016; US Treasuries are calculated on a total return basis.Charts 5 and 6 imply that USTs and JPY have been the best safe-haven assets since 2016. Yet this approach might be too

29、simplistic. To find our favoured safe haven for recent conditions, we decided to take a deeper dive into the data and look for the asset which maximises the risk- adjusted return during periods of market turmoil.By taking a mean-variance approach, we ran 10 million simulations across various asset g

30、roupings to determine a relative preference. Our analysis covered four typical safe havens: gold, US Treasuries (USTs), the JPY, and the CHF. Again, we found short-end USTs to be the best safe haven, followed by the JPY.MethodologyWe analysed safe-haven characteristics of gold, US Treasuries (USTs),

31、 the JPY, and the CHF. To begin to gauge a relative preference between these assets, we analysed portfolios that included equities, and two safe havens. Then we followed a number of steps (for more details on methodology HYPERLINK l _bookmark0 see the Appendices):We filtered the data for periods whe

32、n the VIX has been above 20 since mid-2017. We then found the mean and standard deviation of each assets returnsUsing these statistical characteristics, we ran 10 million simulations that varied the weightings of the assets.We plotted the return and volatility for each hypothetical portfolio.Having

33、run the simulations and plotted the resulting mean-variance scatter diagrams, we assessed which of the two safe havens analysed acted as the better safe haven.US Treasuries a clear winnerThere are three criteria to focus on when interpreting these chartsWe simulated the returns of 10-million portfol

34、ios, each of which contains different weights of US equities (S&P 500), 1-3Y USTs, and JPY-USD. The chart below plots the returns and volatility of each of these simulated portfolios; we have colour-coded the points in the scatter plot by their risk-return ratio. The chart highlights the minimum var

35、iance weighting (grey diamond) and the portfolio with the highest risk-adjusted returns (white diamond) i.e. the portfolio with the highest risk-return ratio.When drawing conclusions from these scatter plots we are looking for three things: 1) how far upwards and leftwards the efficient frontier is,

36、 (2) the frequency of darker red dots relative to dark blue dots, indicating how often a combination of those assets analysed delivers higher risk- return, and (3) the asset weightings in the highest risk-return portfolios. Combining the evidence, we can then determine relative safe haven standings.

37、As a reminder, the efficient frontier is essentially the upper bound of this data cloud. It represents the portfolios which maximise returns for a given level of risk (volatility). These portfolio are superior to those beneath the upper bound as the former always generates higher returns for any giv

38、en level of risk than the latter. For further details on efficient frontiers, please HYPERLINK l _bookmark1 see appendix 4.Maximum Risk-Return RatioMinimum vol portfolioHold short-end USTs when VIX rises above 20 (basket: USTs, JPY-USD, US equities)Source: HSBC, BloombergMinimum Vol portfolio (White

39、 Diamond)Maximum Risk-Return Ratio(Grey Diamond)Return3.88%6.03%Volatility0.74%0.83%Risk-Return ratio5.277.27US Equity weighting1.5%0.1%1-3Y US Treasury weighting98.0%99.2%JPY-USD weighting0.5%0.7%Source: HSBC, BloombergUSTs a better safe haven than the JPYThe white diamond corresponds to the optima

40、l weightings from a risk-adjusted perspective: this indicates almost a 100% weighting in short-end USTs, and virtually no weighting in JPY or equities. Hence these results suggest that USTs are a better safe haven than the JPY.A weighting of practically zero was determined to be optimal for equities

41、, but this should not be surprising given that we have filtered the data for a high level of VIX, hence poor risk-adjusted characteristics of equities. More surprising, perhaps, is the high weighting in short-end USTs, given the extent to which short-end UST yields have risen since mid-2017 (Chart 8

42、). However, this can be explained by the fact that, although the correlation between US bonds and equities can rise during bond-driven sell-offs, any “flight to quality” tends to quickly push the correlation back into the negative territory (see HYPERLINK l _bookmark2 appendix 5 ). Therefore, even d

43、uring phases where equity markets are selling off, our analysis shows that a high allocation in short-end USTs is optimal.Short-end UST yields have broadly risen since mid-173.302.802.30Yield (%)1.801.300.800.30Jan-16Jul-16Jan-17Jul-17Jan-18Jul-18Jan-19US 12m yieldsUS 2Y yieldsUS 3Y yieldsSource: HS

44、BC, BloombergGold: in need of a polishUSTs a better safe haven than goldGold is often perceived as the safe-haven asset of choice. Our methodology allows us to check this statement. By replacing USTs with gold in the analysis above, we are able to compare data clouds to determine the relative prefer

45、ence between USTs, gold, and the JPY.Chart 9 shows the resulting scatter plot of various weightings of gold, JPY-USD, and the S&P 500 after filtering for when the VIX is high. It is clear that swapping gold for USTs results in a worse efficient frontier. The frontier of the data cloud has shifted ri

46、ght displaying higher risk (volatility). The data cloud also has lower risk-return ratios: the crimson data points that indicate higher risk-return ratios were more frequent in chart 7 than in the chart below. Consequently our model suggests that USTs are a better safe haven than gold.If not USTs, h

47、old JPY, not gold (basket: gold, JPY-USD, equities)Source: HSBC, BloombergJPY a better safe haven than goldFurthermore, a majority of those data points with a very high risk-return ratio (over 2.5) are portfolios that give a higher weighting to JPY-USD than gold. Indeed the optimal weightings from a

48、 risk-adjusted perspective are around 70% JPY-USD and 30% gold (white diamond). This, along with evidence that more points along the efficient frontier also assign a higher weight to JPY-USD, indicates that the JPY is also a better safe haven than gold.In depth: GoldWhile golds safe-haven status was

49、 once again confirmed during the financial crisis, this was exacerbated by USD weakness. However, today, our FX strategists would not expect USD weakness in the next downturn. Indeed, recent USD strength may well be a reason why golds recent performance is displaying weaker safe-haven characteristic

50、s. Additionally golds safe- haven allure may also be hindered by opportunity cost. As 2Y USTs currently yield close to 2.5%, gold looks increasingly unattractive on a relative basis, particularly as fears of an unexpected inflation shock seem unrealistic. It is not farfetched to conclude that under

51、risk-off market moves, global flows into USTs strengthen the USD and prevent gold performing stronglyas a safe-haven asset.JPY: safe-haven status securedThere are fundamental reasons why our analysis determines the JPY as the second-best safe haven. Our FX strategists believe the reason is the natur

52、e of Japans external exposures and its asset-liability changes in recent years. Japan has a large net international investment position, and should therefore perform better when the global backdrop becomes more challenging. On the portfolio side, the behaviour of Japanese investors has dominated tha

53、t of foreign investors into Japan. Hence if we were to see a period of repatriation across global financial markets, the likely home bias of Japanese investors could dominate the outflows from foreign investors in Japan. The result: a risk-off move across global financial markets could lead to JPY s

54、trength (see HYPERLINK /R/10/rzhKdWfjvvqx Currency Outlook: RORO playbook for FX).The Swiss Franc no longer provides shelterCHF a weaker safe haven than USTs, the JPY, and goldWhile there is often no place in Olympic history for fourth place, fallen champions still garner significant attention. Once

55、 a solid safe haven, the CHF no longer retains this allure. Our mean- variance analysis produced significantly poorer efficient frontiers (shifted even further rightwards) when including CHF-USD in the basket of assets for the analysis. Chart 10 shows various weightings for the S&P 500, gold, and CH

56、F-USD as our group of assets. Clearly, this has produced a worse frontier and lower risk-return ratios than the scatter diagrams seen previously.CHF further diminishes the efficient frontier (basket: gold, CHF-USD, equities)Source: HSBC, BloombergIn depth: CHFSimilar to gold, the CHF is likely to ha

57、ve been demoted in the safe-haven pecking order when compared to the relatively high yield, but safe-haven USTs (high yield when compared to the negative yield on CHF bonds). However, an additional factor that has pushed the CHF off the podium may be the reduced influence of domestic investors in Sw

58、itzerland.In the post-crisis years, the CHF benefitted from local investors repatriating assets in times of market stress. However, after the introduction of the EUR-CHF floor in 2011, Switzerland saw significant cumulative inflows from foreign investors. Their behaviour is now a much more important

59、 driver than that in the period following the financial crisis (see HYPERLINK /R/36/gPbmQK6vohfB CHF: Calling time on HYPERLINK /R/36/gPbmQK6vohfB the safe haven CHF).An additional consequence of the SNBs intervention in the FX market is that often in times of acute stress, the mere signal of the SN

60、B stepping into the market was enough to weaken the CHFs safe-haven allure. For example, when the CHF strengthened aggressively the morning after the UKs EU referendum, the SNB intervened in the FX market to prevent EUR-CHF fallingthrough 1.06. Since this SNB intervention, the CHF has not been as st