News

Arkus Focus September 2017

Atomic bomb tests and major hurricanes haven’t stopped the S&P500 making new all-time highs, and the VIX has not risen much above 10. Massive corporate deleverage “back to pre-87 levels” and low earning volatility cannot fully hide a very disparate situation with enough example of companies who have piled up debts on flat to declining cash flows, and not just in the oil sector; some valuations look much stretched.
Emerging market spreads have continued tightening while yields have resumed their decline, resulting in stellar performance and extraordinary inflows into the EM debt market. The continued “rush for yield” is raising concerns of increasing systemic risks, with additional pressure arising from large portion of the outstanding debt coming to maturity in the next 12 months.
In both cases indiscriminate allocation via passive investment and other ETF’s is hiding growing structural imbalances while central banks are very slowly starting to close the taps; wage inflation could accelerate the process .

Leading Edge Conference in London

Starting 3rd of October, Arkus will be one of the main sponsors at the next Leading Edge Conference in London!

Martin Ewen, Chief Operating Officer, will be one of the speakers and would be delighted to meet you on-site.

Arkus Focus August 2017

There are currently many parallels with the situation preceding the last financial crisis 10 years ago (record high stock markets, record low volatility, record consumer debt, record M&A, big current account deficits etc…). Banks and corporate balance sheets are clearly stronger, not a problem this time. But like in 2000, valuations of many stocks and bonds seem high. The catalyst for a sell-off is almost impossible to predict and of the few candidates lurking in the background, if one discards political skirmishing, our preferred one would be the record number of zombie corporates and that is at the current low level of interest rate.

Arkus Focus July 2017

Cracks appearing

Every day that passes feels more like 2007. Volatility is low, markets are high, global growth is strong, M&A and PE deals are high, as are house prices and debt levels; and cracks are certainly beginning to appear: witness the sell-off in bonds and tech stocks last month. Hopefully the bubble can be deflated rather than burst.

But there are positives: the relief rally on Macron’s success having moved out of our sample period, the modelled distribution of the eurozone equity market has returned to normal; coupled with the sharp drop in inter market correlation we are encouraged to think that the markets are behaving efficiently with a caution that was certainly not present in 2007 and signs that many fund managers are holding high levels of cash.

Arkus Focus June 2017

A new deal? Bye-bye old Europe, welcome version 2.0.

On the surface not much has changed since last month; volatilities are still surprisingly low, markets keep climbing and agitation around president Trump seems to only impact newspapers.
Markets are focused on the EC: the fear of a Frexit with a potential 2nd tour of the French election between the extreme right and the extreme left saw a 230% jump in expected volatility, followed by an extraordinary optimistic shift of expected return distribution, still persisting to date.
A new leadership is emerging , hope is in the air.

European Risk Management Conference

Starting 31st of May, Arkus will be one of the main sponsors at the next Alfi European Risk Management Conference!

Martin Ewen, Chief Operating Officer, will be one of the speakers at the European Risk Management Conference (in association with ALRiM) and would be delighted to meet you on-site.

Happy to welcome you at our stand.

Arkus Focus May 2017

Towards the end of last year we had a list of near-term events which had significant impact but mostly binary outcomes, as with the Brexit vote. These included the US election, Greek debt renegotiation, US debt ceiling and the French election. Whilst the outcomes haven’t always been as expected (see President Trump), without exception the market reaction for each has been positive for risk assets. Admittedly our worst fears for some of the alternatives weren’t met, but we do wonder about the reactions. Was so much downside priced in? Were the results really that surprising? Or was it that a lot of cash was sitting on the sidelines waiting for clarity? We sense the latter might be the most significant.
But we don’t think we are out of the woods yet. Quite the opposite. We are living in somewhat of a Goldilocks world: solid economic growth, record high corporate profitability, low unemployment and yet almost no signs of inflation. Can it really get any better? And remember who Goldilocks met.

Alfi London Cocktail & Conference

Starting 22nd of May, Arkus will be one of the main sponsors at the next London Conference !

Happy to welcome you at our stand !

Arkus Focus April 2017

The mood in the markets is far from complacent, indeed many are outright cautious at present. But valuations are high and the list of tail risks remains long. Economic growth remains good, but at some point volatility will return, and potentially lots of it. But as 2007 taught us, we might have to be patient.

Arkus Focus March 2017

Volatility changes were downwards again almost everywhere.
It’s a full 10 years on from 2007 when equity market volatility had all but disappeared. And the parallels don’t stop there: equity markets and debt to GDP have reached new highs, there is a “hunt for yield” and investment managers are missing volatility “target ranges” to the downside and have started asking us how to increase their volatility.
And yet in the face of this the list of tail risks remains long: US rate rises, French and German national elections, a possible post-Brexit breakup of the UK and/or EU, the ECB starting to taper, rising inflation in the UK and US, and further fallout from the lower oil price in oil producing countries as deficits remain high.
It seems very unlikely that volatility will remain so low for long.

The Risk Management Function under AIFMD for Private Equity funds

A year ago an association of risk professionals asked us to comment on the impact of the regulation on risk management practice within Private Equity Funds. Was it effective and was it meeting the needs of investors?

For more details, click on the link!

Have a good reading

Arkus Financial Services : The risk specialists

New regulatory requirements aim to monitor and ultimately reduce risks for investors.

For the past 14 years, Arkus Financial Services has been analyzing and mitigating those risks.

Quantitative Finance Symposium

Arkus' Satisfaction Survey - 2017

Event Paris - Hotel Hilton Paris Opera

Save the date: Event 21 Mars

Shortly, you could attend the new event organized by Arkus, Fuchs, FundGlobam and Mebs which will take place at the Hotel Hilton Paris Opéra,

The topic will be the following: L'internationalisation de la place de Paris : comment rendre les fonds des promoteurs français plus exportables ?

Arkus Financial Services : Le spécialiste du risque

Les nouvelles réglementations cherchent à réduire les risques des investisseurs. Arkus s’est spécialisé dans l’analyse de ces risques et leur prévention depuis 13 ans.
Une interview de Christophe Pessault, CEO de la société.

Arkus Focus February 2017

The list of tail risks remains long: French and German national elections, a possible post-Brexit breakup of the UK and/or EU, US rate rises, the ECB starting to taper, rising inflation in the UK and US, and further fallout from the lower oil price in oil producing countries as deficits remain high. And valuations are very high with a Chinese debt bubble, a tech bubble and record high equity markets and near-record high bond markets. Normally these two lists together would lead to high volatility, or at least high implied volatility (which in fairness is well above realised now). And yet we have seen neither in the markets, almost as if central bank intervention, or even the prospect of it, continues to squash volatility out of markets? It’s been suspiciously quiet.

Risk Measurement in Practice

Monday 6th of February,

Martin Ewen, COO of Arkus Financial Services, will give a lecture to the University of Trier.

Arkus Focus January 2017

We start the new year looking at much firmer economic growth and with markets having weathered Brexit, the US elections, a Fed rate rise and the Italian banking crisis. But the list of tail risks remains long: French and German national elections, a possible post-Brexit breakup of the UK and/or EU, US rate rises, the ECB starting to taper, the Chinese debt bubble, a tech bubble, rising inflation in the UK and US, and further fallout from the lower oil price in oil producing countries as deficits remain high. And valuations are very high, and most people have a rational fear of heights. We’re all set for an interesting year!

Arkus Focus December 2016

2016 has been an unpredictable and tumultuous year, with sub-$30 oil, Brexit and Trump to name but a few. We think everyone deserves a break; wishing you all a very merry Christmas and a prosperous new year.

Arkus Season's Greetings - 2017

Best wishes for 2017!

NOSCE TE IPSUM - DO YOU KNOW YOUR LIMITS?

Following the recent publication of the CSSF Annual Report 2015 (currently only available in French), we would like to attract your attention to their comments regarding UCITS’ risk profiles.

Arkus Focus November 2016

Low volatility last month took me a bit by surprise given all the things that could have gone wrong. I put it down to a "presidential pause".
The central banks are keeping the plates spinning, but at some point one is going to drop.

Arkus Focus Octobre 2016

There is a long list of potential things that could cause vol to spike in Q4, "President Trump" being just one. But will the central banks be able to ride to the rescue?

Alfi Leading Edge Conference London

Starting the next 12th of October, Arkus will be one of the main sponsors at the next Alfi Leading Edge Conference London!

Arkus Focus September 2016

It was quiet in August, even compared to most Augusts. The VIX got close to multi-year lows. Maybe a combination of central banks squeezing all the vol out of markets and also a lot of people taking time off?
It's beginning to get more interesting in September. Hopefully not too interesting!

Arkus Focus August 2016

So last month saw the calm after the Brexit storm.
I'm still concerned about how much central banks are distorting markets. How long can it go on for? And what happens when it stops? Might yesterday's failed BoE QE purchase programme be the first sign of a trouble ahead? Interesting times, as ever.

Arkus Focus July 2016

Brexit dominates the news of course, as it does every dinner party conversation. It's interesting to see how surprised the London elite are at their apparent misunderstanding of the rest of the UK. We're a very divided country, and those divisions have now been made clear.

Event Genève - Hotel Kempiski 28 juin 2016

Arkus Focus June 2016

Realised and expected volatilities continued their lower trend ahead of the ECB’s Corporate Sector Purchase Programme which has been added to the Asset Purchase Programme. Surprisingly or perhaps not so unsurprisingly given the Fed hinted rate rise and the UK votes on the EU referendum in late June, some nervousness is creeping back in the market as the realised volatilities ratio has left neutral territory and the recent distribution of equity returns displays some renewed excess kurtosis.

Arkus Focus May2016

There’s not really much to say this month: market moves (ex-Japan) were small and although there was plenty of newsflow markets are quiet. The FTSE is currently tracking for its third consecutive down year, and I think a lot of people in the UK are sitting on their hands waiting for the EU referendum. I'd be very interested to hear your thoughts on the EU debate.

Alfi & Alrim European Risk Management Conference

Starting the next 26th of May, Arkus will be one of the main sponsors at the next ALFI & ALRIM European Risk Management Conference!

Fund Factory Magazine - The Virtuous Circle

FUND FACTORY aims to create synergy with actors of the same size, experts in their own domain: Distribution, Risk, Governance and Management. In this first issue, you will discover articles written by experts and read about recent developments in our profession.

Distribution et gestion cross-border des fonds d'investissement

Mardi 28 juin 2016, de 8h00-12h00.

Petit-déjeuner de travail

Grand Hôtel Kempinski, Genève.

Risk Measurement in Practice

Monday 23th of May

Martin Ewen, COO of Arkus Financial Services, will give a lecture to the University of Trier.

What does it involve? How do you calculate VaR? σ?

Arkus Focus April 2016

The market environment absorbed the initial shocks observed beginning of the year and now shows a general declining in volatility during the month of April.The declining trend in excess kurtosis and implied volatility is to be assessed versus a background of declining corporate profits, stretched valuation and rising corporate defaults. Accommodating monetary policy can only go on so far and there is little room left for maneuver.

Could we be approaching a perfect storm?

Arkus Focus March 2016

Now that oil has found a floor we're back in more fundamental-driven territory. Not that that might reduce volatility. The moves into negative rate territory may have unintended and unforecasted implications. Interesting times, as ever!

Arkus Focus February 2016

It's clearly been a tough time for everyone, unless you're in government bonds.

I see the big driver as slowing china, falling commodities prices, SWF outflows. Market feel VERY flow-driven, with big moves happening gradually over the day with no clear micro or macro events in the price charts.February has so far been a continuation of January, with the added fun of banks facing both falling NIM due to negative deposit rates and higher provisioning should there be further economic slowdown.

Arkus Focus January 2016

We had discussed before how the impact of falling oil and commodity prices hadn’t yet appeared to stress the system as much as it might. We still think that is the case and we are now seeing what is to my mind a combination of a stronger dollar pressuring EM countries whilst simultaneously seeing a regime change in commodities leading to seismic shifts in global current accounts with all the economic and political impact that will entail. Interesting times indeed.

Arkus Focus December 2015

Volatility changes were slightly downwards. Volatilities are now low or medium for all asset classes.

We suggested last month that the market might try one more time to spook the Fed into a(nother) postponement. As of the time of writing the markets are down somewhat, but the high volatilities seen in previous “taper tantrums” have not (yet) materialised.

Case study: Luxembourg-based regulated ManCo, part of one of the leading financial advisors & asset managers in the Nordic region.

We recently assisted this client by supporting the in-house permanent risk management function (PRMF) further formalize its framework of operations to adapt to new regulation and investors’ demand for independent risk monitoring.

Learn how we did it and contact us if you think this solution could apply to you or for a free assessment of how you can improve your risk-based governance.

Case study: British multinational banking and financial services company headquartered in London

We recently assisted this client by providing UCITS compliant risk monitoring system for a large number of portfolios distributed among several fund administrations pursuing a wide range of strategies for tradable assets.

Learn how we did it and contact us if you think this solution could apply to you or for a free assessment of how you can improve your risk-based governance.

Arkus Focus November 2015

Interest rate lift-off seems to keep approaching, the markets panic and then the lift-off can gets kicked down the road again. Surely this pattern can only go on for so long?" Looks like the Fed have dared the markets to misbehave before the mid-December meeting. That, we think, will be the big focus over the next 4 weeks. Unless something big and unexpected happens...

Arkus Focus October 2015

Interesting times, as ever it seems these days. Interest rate lift-off seems to keep approaching, the markets panic and then the lift-off can gets kicked down the road again. Surely this pattern can only go on for so long?

Quantitative Finance Symposium

Arkus is proud to sponsor the first Quantitative Finance Symposium “QuattroPole++” at Trier University, October 13th, 2015.

Arkus Focus September 2015

We had many price moves similar to 2008. What happens next? We think the recent gyrations were more about the Fed liftoff (rather than China directly) and effectively were a taper tantrum mk2. If that's right then at some point we will see some more turbulence.
Please see attached the latest volatility report for a more in-depth discussion.

Arkus Focus August 2015

It's clearly been a bumpy ride with the Greek drama, but that's now (temporarily, again) over, so we suspect we'll have a quiet month or two for now. After that we're getting oh-so-close to the first US rate rise, and that, coupled with some very weak macro data out of China (not to mention Brazil and Russia) is likely to make the road a little bumpier.

Arkus Focus July 2015

The seemingly rapid rise of the VSTOXX from 20 to 32, remains far away from previous bursts of 2009 (22-71) or Sep 2011 (21-54), giving apparent credit to politicians’ faith in the “Eurozone firewall” ability to hold against contagion.

Will our attention be attracted elsewhere as we are getting ever closer to a likely September rate rise in the US?

Luxembourg séduit les promoteurs suisses - Article et photos

Quelles opportunités pour la distribution et la gestion transfrontalière de fonds alternatifs?

Arkus Focus June 2015

Is it really Greece driving the markets, or are we really seeing the beginnings of the end of QE-inflated assets? Either way it makes for interesting watching both in bonds and equities...

Arkus Focus May 2015

Last month was relatively event-free. It looks like the stress might be beginning to build for this month instead: first in bunds and last night in US treasuries. But the very weak US GDP print suggests the "day of reckoning" has been pushed further out, again.

Arkus Focus April 2015

April proved to be an even quieter month than the prior one, probably in part due to the run-up to Easter. The big stories again were central bank related. The ECB has pushed German 10 year bonds down to -15bp (and 2Y down to -28bp) as this is written, and the Fed opened the window for rate rises. The market either doesn't seem to believe the Fed will raise rates, or if it does it won't matter. It's quite likely to turn out to be wrong on both counts.

P.S. as an aside, everybody we speak to wants yield, and doesn't seem to care how they get it. It's VERY reminiscent of 2006/07.

European Risk Management Conference - Highlights and photos

Tuesday 19/05/2015
Chamber of Commerce, Kirchberg, Luxembourg

Did you miss the ALFI/ALRiM European Risk Management Conference? Check out the highlights and photos here.

Operational Real Estate, PERE & Debt Fund Management Conference

Wednesday 27/05/2015
Parc Plaza - Central Luxembourg

The 11th Annual Real Estate Fund Servicing Conference - Operational Real Estate, PERE & Debt Fund Management

Risk Assessing, Monitoring & Reporting under AIFMD to Regulators & Investors

Case study: Major French-based private equity house investing globally

We recently assisted this client build a new independent permanent risk management function (PRMF) and operate it on an ongoing basis.

Learn how we did it and contact us if you think this solution could apply to you or for a free assessment of how you can improve your risk-based governance.

Case study: German-based renewable energy player

We recently supported a German-based client, active in the field of renewable energy, to set up the foundations of its risk management framework right from the beginning. Learn how we did it and contact us if you think this solution could apply to you or for a free assessment of how you can improve your risk-based governance.

Case study: Canadian full-service Real Estate investment firm, focused on PERE funds

Arkus Financial Services designed and implemented a toolkit tailored to the client’s real estate business and already formalized operations in North America. The goal was to assist the client comply with the AIFM Directive, delegated regulations and Luxembourg‘s best practices in relation to compliance matters whilst limiting redundancy of controls already performed and documented within the organization.

Learn how we did it and contact us if you think this solution could apply to you or for a free assessment of how you can improve your risk-based governance.

Case study: ManCo of a Scandinavian based independent asset manager

Arkus Financial services designed a two-hour training delivered by an independent director to independent directors. Learn how we helped board members:

- Understand the regulatory framework relevant to both UCITS and AIFs/AIFMs;

- Learn about the key requirements applicable to both with a particular focus on the Luxembourg context;

- Share practical feedback and insights from a practitioner on key features/pitfalls of the risk management process, risk profile and SRRI.

Do not hesitate to contact us if you think this solution could apply to you or for a free assessment of how you can improve your risk-based governance.

Arkus Focus March 2015

A much quieter month. But now we have two big forces pulling in opposite directions: the ECB trying to buy a very limited and very sticky supply of sovereigns (hence German 10Y at 20bp, vs Japan at 40bp...) and the US getting the markets ready for the start of tightening. It should be fun to watch.

New interactive training available

Our latest interactive training on risk management is now available – Instructor : seasoned risk professional with practical experience as a permanent risk management function for both UCITS and AIFMs.

Arkus Focus February 2015

Volatility trends were in general upwards during January. Almost every asset had High volatility relative to their 12-month averages. The big news was all in Europe: QE, Swiss Franc and Greece. At least high volatilities seemed justified for a change.

Latest Private Equity/Real Estate presentation

Click here to view our latest presentation on services we offer for Private Equity/Real Estate.

Arkus Focus January 2015

Clearly oil was the big news in December (and continues to be so now).
I'm still surprised we haven't seen any collateral fallout. Maybe it's just a matter of time?

Arkus Focus December 2014

It was a bit "back to normal" last month, at least compared to the bumpy ride of October. Volatility was in general low, but any exposure to either Japanese assets or oil-related assets could have led to big price swings and high volatilities. You could have been very right or very wrong last month, and not being aware of portfolio biases could have been costly. Another lesson for risk managers! Anyway, here's wishing you a very merry Christmas and a prosperous New Year.

Arkus Focus November 2014

Volatility is certainly back!

We saw some pretty dramatic price moves over the last 30 days. It feels something big being forcibly wound up: big, sharp moves, often intra-day with little real news driving it and still no indication as to what it may be or whether it is just a flare of money flow. We may yet find out. We mentioned last month the sharp fall in oil hurting someone. So far the only big hit has been the Russian ruble. But we may well see more fallout if it stays at these levels or falls further.

Risk measurement in practice

What does it involve? How do you calculate VaR? σ?

Find out here

Arkus Focus October 2014

After a very quiet summer, risk has returned. Unfortunately, as is often the case with rising risk, it is being accompanied by sharp sell-offs. In this case in equities, high yield and commodities (and any currency not the dollar).

The silver lining is that firstly this will be positive for economic growth (of which there is increasingly little in Europe) and secondly people are now starting to be rewarded for risk. The "hunt for yield" (a la 2006) is probably over for a bit.

A possible negative is that the falls are deflationary. And Europe doesn't need more deflation.

Oil is particularly interesting as at below 90, it's fallen to such a low level so quickly that something will have to give. It could be an over-leveraged oligarch, or we could see another popular revolution in a country that relies on oil/gas revenues as it has to cut budgets. Hopefully more the former than the latter.

Also, the big thing that might happen with a falling oil price could well be - and is even likely to be - a default by Venezuela.