Global Stocks In Step, Sending Managers to Arbitrage (Daniel Hauck and Alexis Xydias)

Created by : Francis Goodwin View profile

Stocks worldwide are moving closer in tandem than at any time in two decades, reducing opportunities for money managers and forcing investors used to buy-and-hold strategies to trade more like hedge funds.

By Daniel Hauck and Alexis Xydias

March 26 (Bloomberg) -- Stocks worldwide are moving closer in tandem than at any time in two decades, reducing opportunities for money managers and forcing investors used to buy-and-hold strategies to trade more like hedge funds.

Jack Ablin at Harris Private Bank is betting the Standard & Poor's 100 Index will rise and betting against the Russell 2000 of smaller shares. At BNP Paribas SA, Talbot Stark's clients expect the volatility of the S&P 500 and Nasdaq 100 will diverge. Morgan Stanley Global Wealth Management's David Darst says investors should look for industry groups that are least aligned with the U.S. market.

Benchmark indexes for the U.S., Europe, Japan and developing nations all added between 1.2 percent and 2.9 percent this year. The similar returns for industrialized and emerging markets, small and large companies, and global industry groups have made it more difficult for investors to increase returns.

``Correlations create arbitrage opportunities,'' said Ablin, who oversees $50 billion as chief investment officer of Harris in Chicago. ``We're going to take advantage of it rather than just bemoan the fact that we can no longer get diversification.''