Zed Francis, chief investment officer at Convexitas, joins Jack to talk about interest rate risk, what really happened to the British pension system, and tail risk as a portfolio diversifier. Francis argues that December 2022 will see a wave of mandatory liquidations by the U.S. retirees forced to take mandatory distributions on their retirement accounts. These forced sales will be larger as a percentage of the typical 60/40 portfolio than they normally are, due to the drawdown in stocks and bonds that have already occurred this year. Filmed on November 8, 2022.

--

Follow Jack Farley on Twitter https://rb.gy/uesguv

Follow Forward Guidance on Twitter https://rb.gy/cy0dki

Follow Blockworks on Twitter https://rb.gy/igyzsj

About Convexitas: https://www.convexitas.com/

Convexitas’ piece on Liability-Driven Investment (LDI): https://www.convexitas.com/insights/liability-driven-investment-de-risking-if/

Convexitas’ piece on duration risk: https://www.convexitas.com/insights/rates-free-risk-duration-duration-everywhere/

__

Get top market insights and the latest in crypto news. Subscribe to Blockworks Daily Newsletter:

https://rb.gy/5weeyw

Market commentary, charts, degen trade ideas, governance updates, token performance, can’t-miss-tweets and more. Subscribe to the Blockworks Research “Daily Debrief” Newsletter:

https://rb.gy/feusos

Find out more about the Blockworks video editor role here: https://blockworks.co/careers/

__

Timestamps:

(00:00) Intro

(00:33) The Financialization Of Everything

(10:27) Private Markets

(17:01) Duration (Interest Rate Risk) Explained

(19:35) The Losses From Rising Rates Are Immense

(26:26) The U.K. Pensions Crisis - Explained In Great Detail

(38:41) Stocks and Volatility

(41:53) "Ignore The VIX"

(45:19) Tail Risk

(50:47) Are Active Investment Managers Underweight Stocks?

(01:00:07) The Different Phases of A Bear Market

(01:07:46) The Credit Markets Are Frozen

(01:10:21) A "Waterfall of Liquidations" Is Coming From Forced Selling From Retirement Accounts

(01:19:45) The Value Of Portfolio Overlays

(01:26:00) Basis Risk

__

Disclaimer: Nothing discussed on Forward Guidance should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets.