Client's view: Assenagon on the use of derivatives in multi asset strategies

Eurex Exchange: Assenagon launched a multi asset fund in mid-November. What is the fund’s investment objective?

Thomas Romig: The aim is to make flexible use of global investment opportunities and map out risk alignment/exposure clearly for investors via the capital preservation framework.

Eurex Exchange: A multi asset strategy with a set capital preservation level. Why are you launching a strategy like that and what makes it so special?

Thomas Romig: A flexible multi asset strategy sets out a very broad framework for investment ideas. By specifying the risk limit, we can make a relatively clear statement about the maximum risk level of the fund. After all, only investors who are prepared to take the risk for the long term and stay invested will be able to collect the returns that can be generated over the long run, too.

Eurex Exchange: What role do derivatives play in that?

Thomas Romig: Due to their flexibility and liquidity, derivatives are a key component of our portfolio structure. We can also achieve different positions using options or futures on various investment classes.

Eurex Exchange: How do you envisage using listed derivatives?

Thomas Romig: We use derivatives to protect ourselves against certain capital market risks, as a cross asset security and also as a way of utilising prospective returns in certain asset classes, for example. To date, we have found that EURO STOXX 50® and VSTOXX® options work well. Liquid volatility instruments are particularly suitable for implementing cross asset hedging strategies.

Eurex Exchange: In which asset classes are you active?

Thomas Romig: It is ultimately the strategy as a whole that counts and we mostly use the following asset classes within that strategy: Equity, bonds, credits, commodities, liquid alternatives (absolute-return strategies), volatility and currencies.

Eurex Exchange: Do you use OTC derivatives, too?

Thomas Romig: Yes, but we prefer to use listed derivatives, as that usually makes trading more flexible, due to them being liquid and transparent. What’s more, that means we are operating within the regulated framework and don’t have to take any specific counterparty risk – either in terms of credit or valuation risks.

Eurex Exchange: Why do you use Eurex?

Thomas Romig: As one of the most important derivatives markets, Eurex Exchange offers a large range of products in terms of asset classes, countries/regions and instruments. Besides standard instruments such as EURO STOXX®, Euro-Bund and MSCI futures, we also use flex products that are offered as part of the Eurex Trade Entry Services.
In addition, Eurex Exchange’s clearing house (Eurex Clearing), which offers the option of segregating specific customer positions, is at the forefront of its field from a legal perspective. That means the risk of default on open derivative positions is hereby reduced even further.

Eurex Exchange: Do you have any more insights on using options?

Thomas Romig: We have had very good experience with medium-term (3 – 9 months) option strategies on the EURO STOXX 50® and the Euro-Bund future for placing short and long positions. It doesn’t all come down to the market trend and the absolute volatility level, the prevailing market positioning and/or market expectations also play a decisive role. For example, call-spread strategies on equity indexes are one way that long positions can be built up in particularly volatile/uncertain market situations. By contrast, put spreads are to be recommended, if the difference between the two volatilities of the long and short put is significantly elevated.

Eurex Exchange: Thank you for talking to us, Mr. Romig.

Assenagon
As an active asset manager for institutional investors, Assenagon specialises in the proactive management of capital market risks and offers its customers holistic, fund-based risk management so that they can achieve their target returns even with a set risk budget. Some 70 specialists who are among the very best in their field work for the company at four offices in Luxembourg, Munich, Frankfurt am Main and Zurich. With EUR 15 bn in AUM, Assenagon is one of the fastest growing asset management companies in Europe.

Thomas Romig, CEFA, is Managing Director at Assenagon Asset Management S.A. and heads Multi Asset Portfolio Management. At his previous employer, Union Investment, he was Head of Multi Asset Management, with responsibility for EUR 12 billion in assets under management, allocated between four major investment strategies. Key rating agencies such as Morningstar, Feri EuroRating, Lipper, citywire and FondsConsult have repeatedly recognised Romig for his achievements. Romig spent 2000 to 2009 as Head of Multi Management at cominvest Asset Management, which later was merged into Allianz Global Investors (AGI).