Concerns Emerge Over Fed Exit

The head of Denmark’s biggest pension fund says his main concern now is how to ride out what may turn into a simultaneous slump across asset classes as central bank liquidity is withdrawn.

“My concern is how the underlying assets perform,” Carsten Stendevad, who oversees $113 billion as chief executive officer of ATP, said yesterday in a phone interview. “The historical risk diversification has to some extent been suspended because central bank liquidity has inflated asset prices. That made all assets rise simultaneously. Now, they may all deflate simultaneously.”

The U.S. Federal Reserve confirmed this week it will end its asset-purchase program amid signs the economy is strengthening. The news sent U.S. stocks and bonds lower while gold prices headed for the biggest drop in three weeks. The main challenge for investors is working out how to hedge against losses as traditional risk models provide little help in navigating the Fed’s exit, Stendevad said.


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