finccam at Fundview`s Vol-Roundtable


finccam's Bernhard Brunner shed light on the asset class volatility in the current market environment together with other experts at the Fundview Vola Roundtable. Despite uncertain times, the volatility premium remains very attractive. With volatility repeatedly increasing, the hedging premium regularly recharges. The uncertainty in the market also tends to boost demand for hedging, which further increases the volatility risk premium.

The premium can be achieved even in a sideways or bear market. The prerequisite for earning the premium even in a bear market is to build up as little equity beta as possible during implementation. This was a major point of discussion among the experts, as providers differ here. finccam's implementation stands out somewhat here, as it has the lowest equity beta.

The relevance of the premium in low volatility and higher interest rate environments was also discussed. In this context, Bernhard Brunner made it clear that low volatility cannot be equated with a low volatility risk premium across the board, as current returns also show. However, sophisticated risk management is particularly important here. finccam is taking advantage of this phase and is even tightening its hedges a little further.

As far as the interest rate environment is concerned, all participants quickly agreed. Since the volatility premium is invested in derivatives that tie up little or no capital, the money is parked in safe bonds when implementing in a fund. This also means that investors benefit from higher interest rates. The earned volatility premium then represents an additional return and is thus a valuable addition, independent of the interest rate environment.

The importance of risk management goes without saying for every provider. Additional hedging using VIX options is now standard here and is also used by some strategies. It was good to see that finccam sets itself apart from the competition with two further measures. The use of caps to limit losses and our intraday delta hedging help to further mitigate potential losses in extreme market stress phases.

In the conclusion, the experts were in agreement. The volatility risk premium continues to represent an attractive portfolio component. Especially in an environment of stagnating or slightly declining equity markets, the premium can offer investors attractive returns. Many thanks to all participants and especially to Fundview for the exciting and open discussion round!