"Inflation is the one form of taxation that can be imposed
without legislation" - Milton Friedman, economist
Down the ages, one blunt instrument that many governments have
used to tackle their sovereign debt problems has been inflation
- to burn away the real value of what they owe.
So it is not surprising to see critics complaining that the
Bank of England has resorted to printing money, or so-called
quantitative easing, to tackle the UK sovereign's debt pile -
as have the central banks in other developed economies, led by
One consequence of this has been to indirectly 'tax' the wealth
of those who saved and 'transfer' the benefit to those who have
excessive debts. This transfer has had, and will continue to
have, an impact upon the retirement and long-term savings
For savers, extreme volatility in the equity markets has not
whetted their investment appetite and inflation is the
parasitic ant eating away at their nest egg.
The asset management industry has of course responded to the
demands of investors. And money has flowed to diversified
multi-asset vehicles - often now including allocations to hedge
funds and specialist sector equities, previously the domain of
only professional investors.
However, the more liquid strategies of the macro and CTA market
are also increasingly being seen as a form of inflation
protection and a potential diversifier in portfolios - and Act
40 funds in the US or UCITS-compliant vehicles in Europe means
that they are moving into mainstream distribution retail
In the past year, some of the largest investment flows have
been into the more liquid macro/CTA strategies - to asset
managers like Winton, Aquila and Aspect (which manages a white
labeled managed futures fund in partnership with Skandia).
The strength of these strategy areas has been highlighted by
many platforms indicating that they are about to launch CTA
funds as investor demand increases - a point highlighted
recently by the ML Alternative UCITS Barometer.
While uncertainty in the markets continues because of political
intervention, these sorts of macro and CTA strategies will
continue to receive investor demand. Only when we reach calmer
waters may investors start moving back to equity
For a free trial of Absolute UCITS please click