NEW YORK : Wild swings in asset prices following Russia's invasion of Ukraine are prompting some investors to pare risk in their portfolios, fearing that the type of volatility seen in commodities in recent weeks could hit other markets.
"It isn't always clear where the contagion risks lie," said Frances Donald, Global Chief Economist at Manulife Investment Management."This is why liquidity needs to be monitored, not just daily, but hourly at this point, for signs of challenges."The so-called FRA-OIS spread, which measures the gap between the U.S.
Mike Vogelzang, Chief Investment Officer at CAPTRUST in Boston, said his firm had taken"aggressive action" in response to the Ukraine crisis to reduce the risk profile of its portfolios. That included cutting equity exposure and selling mortgages and a number of corporate bonds, replacing them with highly liquid short-term U.S. Treasuries.
Investors also highlighted counterparty risk, referring to the probability of defaults in contractual obligations linked, in this case, to an underlying commodity. In a rare warning on Monday, the Securities and Exchange Commission said concentrated positions of prime brokerage counterparties pose particular concerns.
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