As markets become expensive, some investors are buying volatility instead.
With the global hunt for yield getting increasingly difficult as stock market valuations rise, investors are trying to protect their returns while limiting how much risk they take on. That has led the DNB team to go underweight stocks and global bonds, buy CBOE VIX October contracts and boost cash holdings.
“It’s vulnerable,” Varran said in an interview at his office in Oslo. “We see much more that can drag the market down than we see positive surprises. We can’t see where they could come from.”