Media

Thematic Research

DateHeadline

01/01/2014 Why the financial world is now almost impossible to understand

Neil focuses on the disconnect between the financial world and the general public, which is caused by problems of language and inadequate common discourse.  Financial jargon has led to a series of catastrophes (Neil highlights the recent example of a Danish 'Dairy', who were missold a contract they scarcely understood, and lost their entire deposit as a result) - and this confusion extends to national governments. The key to avoiding future disasters is to ensure that all financial language involved in transactions (especially jargon and mathematics), are fully understood.


You can read Neil's article here.

05/07/2012 Neil Record - Revised Essay - Wolfson Economics Prize 2012

Neil Record - Revised Essay - Wolfson Economics Prize 2012

After the initial short-listing process, the five finalists for the Wolfson Economics Prize were asked to re-write their essays before the final round of judging. In this revised version, Neil focuses on designing a route out of the Euro for one or more countries which would minimize economic, financial and political damage, whilst allowing growth and prosperity to replace crisis and austerity. He continues to defend the position that as soon as one country leaves the Euro, the view that the project is 'unbreakable' would be indefensible, whilst analyzing the consequences of piecemeal exits and the continuation of the slow-motion crisis, with particular attention given to the Eurozone banking system.

Neil's full revised submission is available here.

18/06/2012 Discussion: Implications for the Euro of the Greek Election

Discussion: Implications for the Euro of the Greek Election

The June 17th election in Greece will represent a new milestone in the two year-old Eurozone crisis. Record Currency Management Chief Investment Officer Bob Noyen discusses the first implications of the election results. This discussion was produced for an investment audience and focuses on impacts on US investors' asset portfolios. In particular, Bob focuses on the impacts on the Euro both in the short- to medium-term and how the Greek result could impact asset allocation and risk factors consultants face with their clients. Euro equity assets represent approximately 20% of most major indexes and the Euro is the largest single currency exposure for most US institutional investors.

For a full recording of the discussion, click here.

04/04/2012 Neil Record - Wolfson Economics Prize 2012

Neil Record - Wolfson Economics Prize 2012

In 2011, as the eurozone lurched from summit to summit, caught in the throes of the sovereign debt crisis, Lord Wolfson offered £250,000 to the architect of the most elegant mechanism for the unwinding of the eurozone. From the 425 entries received for the Wolfson Economics Prize, a short-list of five finalists was chosen, and announced Tuesday 3rd April 2012. Neil Record's submission was one of the five short-listed entries. In the full paper, which can be downloaded below, Neil outlines in some detail the steps required in a number of areas if a transition from the currency union were to be necessitated. It is Neil's firm view that if both the turmoil of patchwork solutions and the catatstrophe of unplanned default are to be avoided, the currency union must be dissolved immediately and fully as soon as one member state's exit becomes inevitable. Moreover, the transition is to be planned by a secret, completely deniable task force led by Germany, whose threat of walk-out and centrality as a player in the crisis would hold the other nations together.

You can download Neil's full and fascinating entry directly here.

03/04/2012 James Mackenzie Smith - Wolfson Economics Prize 2012

James Mackenzie Smith - Wolfson Economics Prize 2012

In 2011 Lord Wolfson offered a prize of £250,000 for the most elegant and imaginative suggestion for unwinding the euro zone. The second largest prize after the Nobel in monetary terms, the prize caused a clamour in eurosceptic circles and received 425 entries. Record Senior Research Strategist James Mackenzie Smith submitted an entry for the prize, titled 'Plan B', which outlines the legal, political and economic challenges in dismantling the currency union. Whilst Neil Record, in his submission, argues that the breakup would have to be planned in secret, James disagrees and has written a paper which diverges from Neils in several respects. Although not on the short-list for the Wolfson Economics Prize, James' entry is a high-quality piece of economic argument and makes an interesting counter-point to Neil's piece.

James' entry can be downloaded directly here.

01/01/2012 What Next for the Eurozone?

What Next for the Eurozone?

The recent dislocation in currency and credit markets over the travails of the Eurozone has put concerns regarding fiscal sustainability, current account imbalances, and the economic recovery back to the forefront of investors' radar screens. At Record we believe that these as yet unresolved issues are critical and merit further attention and scrutiny. Indeed, what had been termed theunthinkable is now thinkableand distinctly possible.

We believe that the most recent sovereign debt downgrades and the continued volatility in peripheral bond yields are probably not the end of the story. It may have assuaged markets temporarily, but this means that the worst case scenarios are thusnot fully reflected in current asset price valuations. In particular, we feel that there are particular outcomes that have not yet been properly considered and that could drastically affect the evolution of risk appetite, volatility, and asset class returns. Furthermore, the impact of any of these outcomes could come in the form of a sudden, unpredictable event, or 'black swan'. The scenarios all point towards future paths that the Eurozone may embark upon, either willingly or unwillingly, and which require consideration for any investor.

Download here

01/01/2012 Event Risk and Black Swans

Event Risk and Black Swans - what is in store for 2012?

This note outlines what Record's research strategists perceive as the major themes and critical tail risks to be monitored in 2012. While we do not expect all of these risks to materialise over the course of the year, we believe investors should pay heed to the portfolio and liquidity risks that would be created by the scenarios below.

Download here

01/12/2011 The Potential for Capital Controls in Switzerland

The Potential for Capital Controls in Switzerland

Switzerland's Finance Minister has said that Switzerland is examining capital controls and/or negative interest rates as a way of controlling capital inflows.  This note looks at the possible options.

Download here

20/11/2011 The Euro - Consequences of a Break-up

The Euro - Consequences of a Break-up

A few short years ago, countenancing the break up of the Euro was the preserve of sceptics, heretics and the lunatic fringe, a position that has changed dramatically with the unfolding of the Euro crisis. Not only is there now a willingness to contemplate the possibility, but it has moved into the mainstream of political, economic and financial debate. The concerns Record has articulated since October 1998, before the Euro came into being, are now playing out and this paper is a guide to considering outcomes from an institutional perspective. Specifically this paper considers institutional pension funds which make up the core of Record's client base. These entities have entered into hedging assignments strategically to match their assets, i.e. international investments, to their future liability stream which tends to be in a single currency typically where the pension fund is domiciled.

Download here

01/06/2011 FX Transaction Costs - Plugging the Leakage in Returns

FX Transaction Costs - Plugging the Leakage in Returns

Custodian banks provide a service to their clients - to safeguard their assets - and undertake ancillary transactions as required.  Some of these transactions require an accompanying FX trade: this necessity has proved to be a hidden source of revenue for custodians for at least a decade.  Plan Sponsors do not necessarily see custodians as requiring to be monitored on a regular basis, nor do they typically consider the possibility of transferring FX execution responsibility to an independent agent; this paper argues that they should.

This document offers several suggestions including the publication of time-stamps for each trade; a regular audit of FX execution; and execution of FX by an independent agent. In short: greater pricing transparency and/or elimination of conflicts of interest is required.

Download here

07/05/2011 The Euro - Greece in Context

The Euro - Greece in Context

The Eurozone is facing a serious crisis. This is not the first challenge it has faced - there have been several in the Euro's 11-year life, most notably the March 2005 softening of the Growth and Stability pact to (in effect) sanction prior-year breaches of the 3% deficit rule by France and Germany.  But none has yet gone to the heart of the Eurozone's constitution.

In the following pages, Neil Record revisits a paper he wrote in October 1998 (published in early 1999), just before the Euro came into being.  He has annotated in the right hand margin his observations on the scenarios in the paper, updated for the conditions of the current crisis.

Download here

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