Surging volatility and uncertain markets

This week saw the hedge fund database firm HFR launch its long volatility index, with extraordinarily good timing. Kenneth J. Heinz, President of HFR, says that his firm was "pleased to launch our Long Volatility Index at this historic period of surging financial market volatility, offering institutional investors a pure benchmark, increased awareness of and access to sophisticated strategies specifically engineered to produce asymmetric performance through periods of volatility and dislocations."

Hold on to that thought as our review of Houlihan Lokey’s survey of primary investors found that geopolitical instability remains the top concern for LPs. According to the survey, nearly half of respondents (42 per cent) cite geopolitical risks as the most pressing issue for the year ahead. This concern significantly outweighs other risks, such as inflation and interest rates (22 per cent), volatility in M&A activity (19 per cent), and technological disruptions (5 per cent).

Turning away from market travails for the moment, we have two In My Opinions this week, with PwC Luxembourg’s Björn Ebert taking on the subject of bank M&A, writing that if European banks want to compete globally and at scale, they need to get creative and ambitious. "The major European players should be closely watching the eventual outcome of Italian UniCredit’s interest in acquiring German Commerzbank and taking notes on what they should, and shouldn’t, do in their own pan-European expansions," he says.

Meanwhile, Lorenzo Saa, Chief Sustainability Officer at Clarity AI, took on the subject of AI in sustainability. "As capital takes on sustainability, investors face growing pressure to leverage on high quality and reliable sustainability data, while rethinking how investment decisions are made. That means leaning into efficiencies, embracing innovation, and exploring smarter ways to drive performance. Artificial intelligence (AI) is already playing a central role in this shift. With its ability to unlock insights from complexity, AI can help institutional investors navigate an increasingly crowded sustainability landscape, identify risks and opportunities, and meet growing demands—from clients, regulators, stakeholders, and society at large," he says.

Beverly Chandler, managing editor, Institutional Asset Manager

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