Insight Investment is to launch a series of derivatives-based products for the retail market.
Abdallah Nauphal, chief executive and chief investment officer of Insight, says the derivative products will enable investors to hedge their risks.
“Investors can then seek an absolute return from wherever they can find it, such as multi-asset funds, so they can meet their objectives,” says Nauphal.
As an example, Nauphal points to investors saving to buy a house, who want to ensure their investment return keeps pace with house price inflation.
“One solution is to hedge the risk of house price inflation through the use of derivatives,” he says. “This is in the same way as pension funds hedge the risk of their liabilities.
“This would leave investors free to focus on generating the return required to be able to afford the house, whether that is 4%, 6% or 10% a year.
“Investors will come to us or another asset manager for the positive investment returns. The same approach applies to other purchases.”
Bespoke derivative strategies will not be available to retail investors, so Insight will launch off-the-shelf products.
“These products will be designed to help investors achieve outcome-driven investing,” says Nauphal.
He adds that no one knows future returns and volatility from each asset class and that it is only possible to base expectations on historical data.
“Therefore, investors should directly link their investment strategy to their objectives, hedge their risks, such as rapid house price inflation or interest rates, and try to generate positive real returns,” he adds.