Russell's Duval Sees `Super Challenging' Markets Amid Volatility

  • Europe CEO says investors should prepare for more price swings
  • Money manager holding `top quality' cash instruments

Pascal Duval, the chief executive officer of Russell Investments in Europe, says investors should be prepared for even more violent swings in asset prices in 2016 and the year will prove to be “super challenging.”

Money managers at the company, which oversees more than $237 billion of assets, are preparing for volatility by holding “top quality” cash instruments, such as governments bonds with a maturity of less than a month, and assessing their ability to exit trades on a daily basis, he said.

Duval’s caution echoes that of BlackRock Inc.’s Larry Fink who told Bloomberg Television from Davos, Switzerland on Friday that he still believes the market needs to see “blood on the streets” even after stocks slumped to a 2 1/2 year low.

“Volatility in 2016 will be even worse, people are so nervous because of the high valuations in the markets,” Duval said in an interview from the firm’s London office. “Investors will look for any sensational story to push asset values further down.”

About $51.5 billion of the Seattle-based firm’s assets are invested in fixed income securities, including the $5.8 billion Russell Strategic Bond Fund and the $1.7 billion Russell Global Bond Fund. While the firm hasn’t put in place extra bank credit lines to manage liquidity, Duval said they can easily be arranged if needed.

In equities, the money manager expects markets to finish the year higher, albeit with “small single-digit returns.” Duval warned investors should be cautious of buying on the dips because there is the potential for a further selloff.

“To succeed in 2016 you have to be prepared for the risk,” said Duval, who has been CEO of the company’s Europe, Middle East and Africa business since 2012. “It’s OK to give up some upside by putting in downside protection.”

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