From volatility comes opportunity

“It is largely the fluctuations which throw up the bargains and the uncertainty due to fluctuations which prevents other people from taking advantage of them.”  -Keynes

Volatility is not always bad. In fact a good manager should want to see volatility because it provides opportunities. There should be more differentiation across assets when  there is higher volatility. When there is more volatility, investors get paid to gain information and make decisions. 

Systematic managers especially trend-followers should love volatility. Form volatility comes trends. When the market is more volatile, there will be a slower reaction by many investors which creates trends. Investors are not sure what to do, so they will delay any action or take any action at smaller size. 

Of course, the risk always comes in the transition between volatility states. Moving from low volatility to high volatility means that investors will have to be paid to take on more risk. Prices should fall during this transition. Hence, holding a static portfolio may be a losing strategy during volatility transitions. 

Simply put bargains will never be available if everyone knows the true value of assets. It is when prices are fluctuating that investors are unsure of valuation.