The absence of volatility from investment markets is a temporary phenomenon and it will “definitely” return, says Robeco – the only question is “when”.
Speaking in Sydney yesterday, Robeco Singapore fixed income chief executive Maurice Meijers said the consensus view is that low volatility investment environments are the "new normal".
"We do not believe the thesis. We think it's a temporary phenomenon and volatility will definitely come back – it's just a question of what is going to trigger that," Mr Meijers said.
There is a major focus on central bank policy within investment markets, he said – but much of that is already priced into asset prices.
"[US Federal Reserve rate hikes and European Central Bank tapering] is probably not going to trigger volatility because that is very well flagged," Mr Meijers said.
"The rocket launch on Tuesday by North Korea could have triggered volatility, but even that only lasted for a couple of hours.
"But at some point there will be a combination of factors that will stir things up, so we definitely want to be prepared for that."
Robeco's biggest concern worldwide is the mounting levels of government and household debt, Mr Meijers said.
"Post the global financial crisis we have seen quite a significant deleveraging process happening for the past couple of years, and most of that deleveraging has been reversed," he said.
"We see it in the US, where the leverage of high yield companies is even above the levels of 2008."