Question

Countries are exposed to a wide range of global microeconomics challenges and uncertainties, both cyclical and structural in nature.

When managing a multi-asset portfolio, how would you hedge against and/or take advantage of these challenges?

Are there any country-specific attributes that might influence this decision?

Answer 1

Solution:

Multi asset portfolio are consists of various assets like equity, Fixed Income, Commodities and Forex. This portfolio may consists of assets class from different countries and the portfolio is based on thematic levels.

Here are the methods we can use to hedge the portfolio-

1. Derivatives: We can use derivatives like future, options to hedge our risk.

2. Diversifying the asset : buying gold will be useful when share market goes down

3. Hedging of currency: This portfolio consists of various assets from different country hence we need to hedge the currency of different countries as well.

Yes there will be various country specific attributes that might influence the hedging decision.

1. Exchange rate fluctuations

2. Interest rate fluctuations

3. Economic stability.