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Clients of bank index platforms are adapting to a new investment climate, increasingly opting for more defensive strategies and specifically positioning for volatility spikes similar to the ones markets experienced in early February.
Investible index platforms, which provide passive tailored exposure to different investment themes, are offered by many investment banks and have seen huge inflows from clients ranging from sovereign wealth and pension funds to sophisticated asset managers.
But since a simultaneous bond and equity sell-off in February, equity markets in the US and EU have been more fragile. After February, concerns about rising rates, the end of quantitative easing in Europe and the tech sell-off in March have made investors more cautious.
Going short implied equity volatility, an investment strategy that was hugely successful last year, was dealt a blow by the huge explosion in the Vix index in February. The Vix is an indicator for implied equity volatility on the S&P 500, calculated using options on the index.
Short equity volatility strategies are now treated with more caution by clients of investible index platforms, with certain strategies specifically put in place to profit from subsequent spikes.
JP Morgan has seen considerable interest from clients looking to get exposure to a bespoke version of its intraday momentum strategy, according to Arnaud Jobert, head of investible index structuring at the bank.
"Intraday momentum strategies have been a big focus of my team as investors have been increasingly looking for diversified and defensive strategies that are...