Dealers fear death of dividend risk premia strategy

Shrinking returns on so-called pull-to-realised premium in dividend futures strategies blamed on overcrowding and increased earnings risk

Some strategists say shrinking returns are a result of overcrowding

A popular risk premia play on European dividend futures may have run its course, dealers fear, with returns from capturing the so-called pull-to-realised premium in short-term dividend futures having all but evaporated.

"Over the last two years, this strategy has made almost no money," says Stanislas Bourgois, head of equity derivatives strategy at Credit Suisse in London.

Dividend futures on equity indexes typically trade at a discount to forecast realised levels because of the perceived risk