Panel Discussion on Options and Volatility Product Usage by Institutional Asset Owners at RMC

The first panel discussion at CBOE RMC brought together a variety of asset managers for a discussion around using options and volatility derivatives.  The panel was moderated by Neil Rue, CFA, Managing Director, Pension Consulting Alliance, LLC

Participants in the discussion were –

John Burkartzmeyer, Senior Trader at the State of Wisconsin Investment Board
Paul R. T. Johnson, Board Member, State University Retirement System
Mike Nichols, CAIA, Investment Officer at the Texas Tech University System
Leighton A. Shantz, CFA, Director of Fixed Income at the Employee Retirement System of Texas

The major questions along with selected panelist’s responses appear below –

“What types of strategies do your boards exclude you from using?”

  • As long as we demonstrate the return enhancement our board is fairly agreeable to many of the strategies we propose – both listed and OTC
  • For the most part each of the panelists have boards that are very acceptable to the use of derivatives

“Has your board’s attitude toward the use of derivatives changed over time?”

  • One response was that their board noted they were missing opportunities they became more amenable to using derivatives
  • An interesting statement is that success using derivatives begets success so as strategies have worked the board has become more open to using derivatives

“What’s new with respect to your approaches?”

  • One manager noted that they had hired some long short managers
  • Another panelists talked about stepping up hedging actives

“How do you use volatility and equity related derivatives?”

  • Several panelists noted they use derivatives for asset allocation along with hedging activities
  • It was noted that one manager will get long volatility when they consider it appropriate
  • A panelist noted they like to engage in risk reversals when appropriate

“How does your fund approach using VIX?”

  • One manager noted he uses VIX as a model input along with TYVIX
  • Other panelists noted the use of VIX related derivatives to enhance performance