NEW YORK, Jan. 21, 2021 /PRNewswire/ — Harvest Volatility Management, (“Harvest”), a leader in options-based yield enhancement strategies, risk reduction, alternative beta and absolute return investment strategies for institutional, family office and high-net-worth investors, is today sharing its outlook on what the New Year is likely to bring for investors. Chief among the firm’s views for 2021 is that asset allocation and a total return focus to portfolio construction – carefully balancing risk and yield across asset classes – as well as the utilization of alternative strategies that incorporate options and derivatives will be essential to successfully navigating the markets and generating outperformance in 2021.
According to Harvest’s Chief Operating Officer Garrett Paolella, with the Federal Reserve continuing to keep rates low and adding stimulus to the market, investors can expect returns from fixed income in 2021 to once again be challenging at best, making a strategic asset allocation framework focused on total return while finding alternative ways to generate yield key.
“With rates expected to remain low and the passage of the new Covid relief stimulus bill, the capital risk in bonds will be far higher than in equities for the first time in memory, making the traditional 60/40 stock/bond portfolio mix not a viable option for investors seeking yield,” said Paolella. “With many investors all chasing the same equity market returns, where can people turn to seek out opportunities for alpha and better risk adjusted returns? This makes the need for proper asset allocation approaches that utilize alternative strategies while carefully balancing risk vs yield all the more acute.”
In an environment like this, investors may want to seek out alternative sources for generating yield or managing market volatility through the use of options and via access to managers with global macro expertise across a number of asset classes. Equities will be extremely important in efforts to generate both yield and returns, so manager experience and expertise will be essential.
“2020 showed the value of a differentiated, actively managed approach to navigating market volatility and uncertainty,” continued Paolella. “2021 appears likely to see a continuation of that trend but with total return risk a much more important point of emphasis, and well-constructed strategies designed to enhance yield and reduce asset class risk exposures are likely to play an ever more important role in investors’ portfolios.”
Paolella and his colleagues write regularly about their views on the markets, portfolio construction, and more, and can be followed here: https://hvm.com/research/.
About Harvest Volatility Management
Founded in 2008, Harvest Volatility Management (Harvest), is one of the world’s leading derivative asset management firms with approximately $3.6 billion in assets under management as of August 2020.
With an expert team of investment professionals with many decades of combined experience managing volatility and option related strategies, Harvest provides its client base of institutional, family office and high-net-worth investors a suite of yield enhancement strategies, risk reduction strategies, alternative beta strategies and absolute return investment strategies that seek to enhance yield and reduce asset class risk exposures for clients.
This general market commentary should not be the basis of an investment decision and does not constitute an offer to sell or solicitation of an offer to buy any security. The views and opinions expressed constitute the author(s) judgment based on current market conditions, are subject to change without notice, and may differ from those expressed by other areas or employees of Harvest Volatility Management LLC (“Harvest”). Any securities or indices referenced are shown for illustrative purposes only, and are not intended as a recommendation or endorsement by Harvest or by the author(s). In calculating assets under management for Harvest’s overlay strategies, Harvest utilizes notional valuations and mandate sizes instead of market values. This document may contain expressions of opinion, which are subjective and may be unsubstantiated, and should not be relied upon in making an investment decision or for any other purpose.
By: Garrett Paolella
Chief Operating Officer
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1Please note that the Adviser calculates its assets under management with respect to its overlay strategies based on notional valuations and mandate sizes rather than market valuations. AUM is as of 12/31/2021.