Investors are prioritising liquidity and more precise outcomes for asset allocations as they navigate volatility in global markets, according to derivatives investment experts who spoke at a recent conference in Singapore.
They observed that investors are demanding a broader variety of products alongside detailed cost analysis in addition to more actively-managed diversification strategies for asset allocations.
Anson Chow, director of institutional sales at US quantitative trading firm Jane Street in Hong Kong, said investors are focused on assessing liquidity, which is crucial in a volatile environment as it allows investors to buy and sell assets quickly at fair prices, and with minimal transaction costs.
“There is a desire to basically revisit what is liquidity, where is liquidity? How do you access the liquidity? In what form of access is liquidity?” Chow said during a panel discussion at the Eurex Exchange Derivatives Asia Insights 2026 conference in Singapore on April 14.
He said technology has also enabled investors to transact and execute direct trades, which has an impact on market liquidity, Direct trading bypasses traditional intermediaries, allowing faster execution, greater transparency and more competitive pricing. This will lower costs and reduce risks, helping to draw more market participants and improve liquidity.
Understanding liquidity is now very much part of risk management, said Siddharth Chatterjee, multi-asset solutions portfolio manager for Asia Pacific at US asset manager Franklin Templeton, who was also on the panel. But he argued that relatively illiquid private market assets can also be instruments that counter market volatility.
“They [private assets] are more locked in,” he explained. “That illiquidity gives you greater flexibility to reduce volatility in the portfolio while still aiming to meet clients’ return targets.”
He pointed out that the increased use of private assets in portfolio allocation comes as bonds lose their appeal as diversifiers in an environment where the threat of inflation keeps interest rates relatively high.
“At least half of our fixed income bucket has been moving to an alternative asset market,” Chatterjee said.
For institutional clients seeking total returns, he said assets are allocated with a medium to long-term view into the portfolio, which is then overlaid. A portfolio overlay is an active investment strategy that uses derivatives to manage risks or enhance returns without altering the underlying assets.
Eurex is expanding its listed alternative products to meet growing institutional demand for cost-efficient, transparent and centrally-cleared alternatives to over-the-counter products, according to Jens Quiram, global head of sales and marketing at the exchange, who was also a panellist.
He said Eurex is putting more emphasis on efforts to bring the OTC and listed worlds together into a hybrid structure that maximises capital, margin and operational efficiencies for market participants.
ETFs
The liquidity issue and increased focus on investment outcomes also ran across a separate panel discussion on the use of exchange-traded fund derivatives as overlays to enhance returns.
Rehmat Johal, vice president of iShares Asia Pacific equity product strategy at US asset management giant BlackRock Inc., said the increased traction of options-based ETFs, including buffer ETFs, reflects investor demand for more precise outcomes. Buffer ETFs use options to cap maximum upside while protecting against a specific percentage of downside loss.
Johal pointed out that the use of options to manage risks is not new.
“What is new,” she said “is the idea of the fact that you can package all of this complexity and sophistication and democratise access to wealth investors, regional investors, and even to institutional investors who just want the same thing, but in a simple clean wrapper.”
Dennis Fok, chief investment officer of ETFs in Hong Kong at South Korean investment manager Mirae Asset Global Management, said he wants to see more derivatives contracts listed on Asian bourses.
According to Fok, listing these products as ETFs will bring greater transparency and reduce market volatility. “People don’t need to panic[when] they understand what is going on.”
