Investors urged to look at hedges as cost falls

INVESTORS should consider buying relatively cheap hedges to protect their portfolios, while looking for opportunities in illiquid markets like private equity, real estate and hedge funds, advised Citi Private Bank in its 2014 outlook briefing.

Citi global chief strategist Steven Wieting said yesterday: "It is cheaper to hedge risk now. The insurance cost in the credit default swaps market has collapsed."

Investors usually trade options and futures on equity, credit or foreign exchange markets to protect their investments against various business risks. Volatility across markets has fallen in the past year, decreasing the cost of buying these instruments.