Volatility-Targeting Funds Leverage Up at Fastest Since ‘18 Rout
- Exposure to stocks swells as equity swings remain subdued
- Markets look different from two years ago, says Nomura
This article is for subscribers only.
A breed of systematic trader acutely sensitive to volatility is charging into U.S. stocks at the kind of pace last seen before “volmageddon” rocked Wall Street almost two years ago.
Volatility-targeting funds are doubling down on equities after geopolitical turmoil that threatened to derail the bull market in the end barely slowed it down. These players buy and sell based on price swings, and their leverage -- a measure of exposure to stocks -- now sits at its 81st percentile since 2011, according to Morgan Stanley.