GLIndexes
GL Indexes is a London-based independent alternative data provider
About GL Indexes
Founded by the widely-recognised pioneer of the concept of Global Liquidity and author of Capital Wars Michael Howell, GL Indexes brings a different perspective to understanding capital markets and economies by focusing on international capital and domestic liquidity movements.
Knowing the size and direction of these international flows as well as changes in domestic liquidity conditions helps to pinpoint those asset classes, markets and industry groups that will underperform and outperform.
The firm puts strong emphasis on understanding fixed income and currency markets and consequently has a consistent ‘top down’ view of stock markets. The firm is always on the look-out for signs of Central Bank errors: it watches policy makers’ hands rather than trying to read their lips! Its unique and timely database of liquidity and capital flows, covering 80 countries including all the important major markets and regions over a near 40-year history can be downloaded real-time by clients.
The analysis framework is especially helpful for understanding investment risks. Every major financial crisis is preceded by a liquidity surge and high velocity cross-border flows. By monitoring these cycles, GL Indexes categorises capital markets into regimes, and by using the firm’s unique Tactical Style Selection (TSS) system makes asset allocation and manager style recommendations. What makes us different? We rigorously test our alternative data for different investment solutions. Quantitative back tests of the methodology, academic papers and an independent audit by a major international risk consultancy are available.
The firm has an international client base. This includes Sovereign Wealth Funds, Central Banks, asset managers, insurance companies, charitable foundations, private family offices and hedge funds.
What is liquidity?
Liquidity consists of all cash and credit available to financial markets, once the immediate transactions needs of the real economy have been fulfilled.
It is a sources and not a uses of funds definition. Money supply, a rival concept, is a uses of funds measure because it comprises bank deposits. Banks are no longer the dominant conduit for liquidity, and credit is a more powerful guide to purchasing power than deposit money. Moreover, liquidity cannot be measured by interest rates, as the 2007/08 financial crisis has shown. For example, low base interest rates and tight liquidity mean wide spreads and a high effective cost of funds.
Liquidity transmits its influence to the real economy and financial markets through duration. Duration is a hybrid between liquidity preference and time preference, i.e. it measures the effect of liquidity over time. Investors and businesses target a desired duration and change their asset mix to attain these targets.
Liquidity hastens and smooths this adjustment; illiquidity forces it to become abrupt and often disruptive. Changes in duration affect the composition of the capital structure and the mix of investments. Modern business cycles have become more cycles of duration than growth.
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