The rise of alternative beta strategies seems inevitable as investors chase greater levels of diversification in their portfolios. What are the secrets of alternative beta’s success and what obstacles can still impede its progress?

With the public markets all but closed, issuers have turned to private and structured products to fulfil their requirements. Those who have maintained the best relationships with their investors and dealers have proved best able to ride out the turmoil, printing deals at half their CDS levels or better. Infrequent borrowers and those who have taken cheap funding for granted are in for a shock.

Inflation, far from being a thing of the past, is back in the forefront of investors’ and issuers’ minds. The increased use of innovations such as liability-driven investment means a rise in demand for inflation-linked products. How are the markets responding?

Structured products debate: presents a range of new challenges for providers and distributors of structured notes. Representatives of leading structured products houses discuss those challenges, and the opportunities.

Last month the panel examined volatility and the reported demise of the dollar. This month, they discuss the merits of prime brokerage, the weakness of algos and how to generate alpha.

The global credit crunch has underlined to banks the importance of cash management and transaction banking as core businesses.

Volatility in FX has increased because of the credit crisis but not as much as some expected. Inflation will bring more pressure and central banks face a dilemma.

Infrastructure investment is not without risk. Even the US has found this; the collapse of a bridge in Minneapolis in August led to the realization that much of the country’s ageing infrastructure needs refurbishment. But flows of new money bring their own problems. Investment skills and experience remain the pre-eminent qualities required to succeed.

Shared service centres or payment factories? Corporates have to choose which system works best for them. There is no one size that fits all, while good working partnerships with banks are as important as ever.

As volatility spreads across the debt markets, the CMBS market is taking stock. Property derivatives are likely to increase volatility in the market and contribute to spread widening just as refinancing activity – a significant driver of CMBS volumes – slows. But as competition between commercial lenders and conduit lenders expands across Europe, the market is looking to new jurisdictions to maintain growth.

The recent rise of shareholder activism, particularly from the hedge fund sector, has not been universally welcome. But should politicians and regulators step in, or should the market police itself?

The optimization of working capital is the treasurer’s crucial concern – all the more so as rates rise and credit conditions tighten. Financing issues within supply chains are key, and the increasing complexities of supplier-buyer relationships are creating new credit and payment pressures.

Environmental, social and governance issues are increasingly prominent with regard to investment management in emerging markets. However, does taking a principled approach to portfolio construction offer the opportunity for greater returns, or leave investors with one hand tied behind their backs?

Commodities offer a means of diversifying investment portfolios, and of bringing down volatility. They can also offer good returns to the savvy investor. But the markets still have some way to go in terms of increasing sophistication.

In the second part of our debate on FX, we examine the buy side as it develops its interest in new instruments such as exotic options, and examine key areas of innovation such as prime brokerage and e-commerce.

The jumbo covered bond market had another banner year in 2006. A record €170 billion of issuance was accompanied by significant globalization of the market. But the growing range of structures, from an ever-expanding group of countries, is a double-edged sword, adding complexity as well as diversification.

Low volatility in the FX market should not necessarily mean low returns.

The range of structured credit products on offer to investors has grown as they seek to increase returns in a low-yield environment. The next stage, led by CPDOs, is to create more spread-based, rated products that incorporate default and market risk.

The regulatory framework of Europe’s single payments system is effectively in place. But the details of implementation by banks and corporates are still a matter of debate.

The inflation-linked bond market has grown dramatically in size and sophistication. What is driving its expansion, and just how far can the market develop?

Structured product providers aim to be all things to all people: risk reducers, alpha generators, beta replicators – you name the risk and return profile wanted and they will match it. However, some institutional investors remain distinctly wary of what is on offer.

Activist shareholders have a bad name. Helen Avery brought together a group of hedge funds to uncover the positive role that such investors can play.

The battle to persuade clients that active currency management is a key tool has been so convincingly won that overlay is now being transformed by leverage and the search for alpha. But what are the risks?

Volume and profits in the FX market have grown more consistently than in any other part of the financial markets. New entrants and existing users still cannot resist the promise of diversification and excess return.

Corporate treasury bears the brunt of regulatory and technological change, and those changes are accelerating. At the same time, demands for performance increase, and it’s the banks who have to deliver.

The hedge fund industry is now institutional. In the US, 5% of the groups run 65% of the money, while in Europe concentration is even greater. To keep up, prime brokers need multi-asset skills, cross-margining and the IT to match. Dog walking may not be available any longer.

A huge influx of liquidity has made the collateralized loan obligation almost standard fare for Europe’s institutional investors. But as they snap up CLO equity and new credit opportunity funds, they need to choose carefully.

The unbundling of execution and research costs will dramatically accelerate the global consolidation of equity broking firms. But it also raises questions about the quality and efficiency of the buy side.

Companies with optimized financial supply chains have 30% to 35% better market capitalization than companies that haven’t. However, forging the links between treasury and operational departments is hard, particularly as supply chains enlarge and globalize.

The structured credit market has truly come of age. The correlation meltdown of 2005 spurred a new round of innovation, and shook out the weaker players. A new willingness on the part of investors to buy every part of the capital structure has encouraged the creation of a new suite of products, with more to come. However, with these new products come new risks. Now, more than ever, choosing the right manager is crucial.