Société Générale has partnered with Raise Partner, a firm selected from the bank’s incubator dedicated to fintechs specialising in market activities (Global Markets Incubator (GMI)) to optimally allocate risks in a portfolio of systematic strategies while controlling the total leverage on certain sectors and risk factors.

The fintech has worked with Société Générale Cross-Asset Research to develop a method based on the look-through approach of strategies positions which has resulted in a solution combining the analysis of long-term risks, taking into account changes in correlation regimes, and the risk of short-term gaps.

‘The innovative aspect of the approach consists in enriching the data samples with atypical scenarios and focusing on tail risks,’ said Sandrine Ungari (pictured), head of cross-asset quantitative research at Société Générale. ‘The results show the importance of portfolio construction work and its key role in alpha generation.’

The portfolio optimisation solution required ‘significant optimisation work’ since the exercise was carried out on a portfolio comprising trend-following, carry and equity factor strategies, based on a large number of underlying assets (equities, foreign exchange, commodities, interest rates, bonds). Its aim is to address constraints on risk exposure by type of instrument, by country or by factor.

The French bank stated that this collaboration is ‘taking place against a backdrop of strong demand for systematic strategies from investors seeking alternative returns’.

Allianz faces another two lawsuits over alleged US$2 billion Structured Alpha loss

The City of Milwaukee Employes' Retirement System (CMERS), a multibillion dollar US retirement plan, has filed a complaint in the United States District Court for the Southern District of New York to ‘recover the losses it incurred as a result of negligence and breaches of fiduciary and contractual duties by Allianz Global Investors US’.

The complaint alleges that CMERS invested in the Structured Alpha US Fixed Income 250 and the Structured Alpha 1000 Plus, and that Allianz deviated dramatically from the market-neutral strategy its contracts and fiduciary obligations required it to follow.

The complaint also alleges that once the Alpha funds started incurring losses in February, Allianz took a series of actions in contravention of the risk-management principles and investment strategy it was required to follow that exacerbated the losses in the Alpha funds.

The CMERS lawsuit is the latest in a string of such complaints filed against Allianz. Earlier in July, another multimillion-dollar retirement plan, the Arkansas Teacher Retirement System (ATRS), accused Allianz of breaching fiduciary and contractual duties over these two products.

Blue Cross Blue Shield Association National Employee Benefits Committee is also suing Allianz and its consultant over big losses on volatility investments; while public pension funds for Fairfield, Connecticut, and Lehigh University’s endowment have also filed lawsuits against Allianz over the Structured Alpha products.

Two of the firm’s structured hedge funds were in the list of casualties of the market sell-off in mid-March after taking heavy losses on stock options trades.

The two funds, Structured Alpha 1000 and Structured Alpha 1000 Plus, had been net buyers of put options giving the holder the right to sell an asset at a predetermined price in the future. The put options were designed to hedge against losses the funds might endure from other positions should the market decline, but the pace of the sell-off had a ‘particularly large impact on the options positions held by Structured Alpha funds – particularly the two highest target alpha private strategies’

Hang Seng Indexes rolls out ‘next gen’ indices

Hang Seng Indexes has launched the Hang Seng Shanghai-Shenzhen-Hong Kong NextGen Communications Index and the Hang Seng Shanghai-Shenzhen-Hong Kong E-Commerce Index.

The two new indices are targeted at investors seeking exposure to the performance of companies that are operating in two of the most keenly watched industries: next-generation communications and e-commerce.

The Hang Seng Shanghai-Shenzhen-Hong Kong NextGen Communications Index tracks the performance of telecommunications value chain players contributing to the development and growth of next-gen communications, including wireless telecommunications services, communication equipment and telecommunications consulting services providers.

The Hang Seng Shanghai-Shenzhen-Hong Kong E-Commerce Index replicates the performance of companies that derive a significant proportion of their revenue from internet retail, e-commerce platforms & services, and logistics services, as well as digital marketing & advertising, and that are well placed to benefit from the increased adoption of e-commerce and online shopping.

The index universe for each of the two indexes covers stocks listed in Shanghai, Shenzhen and Hong Kong.

BBVA boosts ECM execution capabilities

BBVA Corporate & Investment Banking (CIB) continues to add to its equities capability for corporate clients, issuers and institutional clients following recent developments relating to its equity investment products factory and digital platforms for product distribution.

The Spanish bank has launched a strategic alliance with Oddo BHF, one of Europe’s leading equity research and distribution entities, in a move to expand its equity capital market (ECM) execution capabilities to address requirements around the Mifid 2 regulation and the concentration of liquidity pools within certain investor groups.

Under the terms of the partnership Oddo BHF, which covers over 500 listed companies and has access to a wide global base of institutional investors from its offices in Paris, London, Frankfurt and New York, will provide execution capabilities for primary market transactions to BBVA’s corporate clients.

As part of the deal with BBVA, Oddo BHF will open an office in Madrid to broaden its coverage of Spanish and Portuguese listed companies.

Spectrum: despite lower volatility, stock market sensitivity remains strong

In September, 37.1 million securitised derivatives were traded which represents a 36% increase over the previous month, according to Spectrum Markets. The share of out-of-hours trading (ie 1730-0900) was 38.5%.

According to the European platform for structured products, 88.6% of the trading volume of securitised derivatives in September was attributable to indices (August: 85%), 7% to FX (August: 5.4%) and 4.4% to commodities (August: 9.6%).

The top traded underlyings were OMX with a share of 30.1%, followed by the S&P 500 with 27.7% and the DAX with a share of 14.6%. All 21 underlying have been traded in September (overview).

According to Spectrum, 102 million securitised derivatives were traded in Q3 2020 marking a new high with an increase of four percent compared to the previous quarter. Executed trades at 387,969, also saw an increase of 7% over Q2 2020.

‘The recent impact of sudden market events shows how fragile the rebound of the global equity markets still is,’ said Tobias Stöhr, sales executive at Spectrum Markets, adding that the increase in out-of-hour trading ‘underlines the importance for investors to be able to react to unexpected market situations at any time’.