When you are global head of rates at a $1.7trn (€1.53trn) fund, you can not spend a month on the sidelines to avoid risks, no matter how big.
The UK’s EU referendum, a US Federal Reserve policy decision, an Organization of Petroleum Exporting Countries (Opec) meeting, and the prospect of another muddled Spanish general election are all due in June.
Like it or not, the biggest investors must take positions, particularly to spread their risk, according to David Tan at JP Morgan Asset Management in London.
“We can’t hide,” said Mr Tan, adding that government bonds are in demand for their track record of weathering market volatility better than many asset classes.
“The key is in the calibration of our exposures, as well as ensuring that portfolios are well-diversified.”
Money managers struggling to develop a clear market view beyond June say they are turning to gold and the Japanese yen, which tend to benefit when investors become more conservative.
Sovereign bonds from major economies are being used as a hedge even though yields are close to historic lows.
They have slipped to below zero on $8.3trn of debt, or about a third of the total.
Risk events for investors start as soon as this week, with Opec’s ministers gathering in Vienna to discuss oil output levels and prices, an ECB meeting and the US payrolls report for May.
June may produce “risk-off catalysts in global financial markets”, as options already are pricing in “materially higher” volatility for the end of the month, said Mark Dowding, a money manager at BlueBay Asset Management.
“There clearly will be an elevated sense of risk in the month of June,” he said.
Mr Dowding said that he is using foreign currencies as the “clearest way” to hedge.
“There is universal agreement if we see a Brexit you will initially see a very sharp fall in the pound,” he said.
Sterling was trading yesterday at just over 76 pence against the euro, suggesting fears about the UK exiting the EU have receded.
Sterling was trading as low as 81 pence in early April.
A weak euro tends to help Irish firms exporting into Britain.
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