Volkered: How Financial Sector Reforms are Creating Opportunities for Hedge Funds
Sep 16 2014 | 11:28am ET
By Sam Diedrich
Director, PAAMCO
Six years on, evidence of the immense distress in asset prices resulting from the 2008 financial crisis are difficult to find. Today most markets have fully recovered their losses and are now again teetering on frothy. With the S&P PE ratio now close to 19x, and with high-yield spreads now at just 334 bps, it’s hard to tell which part of the capital structure is more fully-valued. Market liquidity premium, the premium investors receive for taking on liquidity risk, appears to be near all-time lows based on a variety of measures recently outlined in the Bank of England’s Financial Stability Report. Hedges have mostly been costly to hold, and investor demand for ‘tail risk funds’ has all but disappeared.
The full article is available here.