High Yield Perspectives. Prudential Fixed Income. The Sweet Spot of the Bond Market: The Case for High Yield s Upper Tier June 2003
|
|
- Sharleen Banks
- 6 years ago
- Views:
Transcription
1 Prudential Fixed Income The Sweet Spot of the Bond Market: The Case for High Yield s Upper Tier June 2003 Michael J. Collins, CFA Principal, High Yield Many institutional investors are in search of investment opportunities that can potentially enhance expected returns and/or increase return in a risk-controlled fashion. The prevailing low interest rate environment, combined with tremendous equity volatility and lessthan-compelling equity valuations, has exacerbated this dilemma for plan sponsors and corporate treasurers. High yield bonds offer a solution that has the potential to enhance return while providing diversification to the investor s portfolio. However, some investors may be fearful of credit defaults, volatility and a high correlation with equities. Such investors may be interested to learn that the upper tier of the US high yield market has quietly generated an impressive track record. This higher quality segment of the high yield market has consistently provided investors solid returns with moderate risk in both absolute and risk-adjusted terms. THE CASE FOR BBs BBs Have Historically Outperformed Other Corporate Bond Sectors As the table below illustrates, BB-rated high yield bonds have historically outperformed other corporate bond sectors both investment grade and high yield. The competitive performance vs. investment grade sectors is even more remarkable in light of the fact that high quality interest rates are at 20-year lows while yields on BBs are average. Based on this, BB-rated bonds could be considered the sweet spot of the bond market. High Yield Perspectives For more information contact: Kevin A. Myers Prudential Investment Management 2 Gateway Center, 4th Floor Newark, NJ Return and Risk Within Corporate Bond Market July 1983 to December 2002 Annualized Return (%) Annualized Std Dev (%) Sharpe Ratio AAA AA A BBB BB B CCC Source: Lehman Brothers Corporate Indices
2 Taking Incremental Risk Within High Yield Doesn t Pay High yield is a paradoxical sector in that investors have not been paid over the long term for taking incremental risk. Because of the asymmetrical nature of corporate bond returns, as well as the particular susceptibility of high yield bonds to defaults, the traditional upside-downside relationship has not worked in the favor of high yield investors. In the high yield market, higher yielding securities have ultimately produced the lowest returns, due to the high incidence of principal-eroding defaults. In contrast, the lowest yielding securities have actually re-paid their principal often enough to more than overcome their ex ante yield disadvantage. For example, over the past 19 years, CCC-rated bonds have returned only 4.3% while BB rated bonds have provided a return of.4% with much less volatility. While this strikingly unusual historical risk/return relationship may imply that the high yield market is inefficient, there is some theoretical justification for this imbalance (see page 5). Annualized Returns (%) BB Return and Risk Within High Yield July 1983 to December 2002 B Volatility* (%) Of course, over short time horizons, particularly during bull markets in high yield, the lower quality tiers of high yield will outperform on a total return basis. We have experienced this phenomenon again recently, as CCCs have outperformed since the autumn of But, on a riskadjusted basis, BBs are still compelling. To forego the high volatility exhibited by CCCs, many fixed income investors would be satisfied with the lower double digit returns provided by BBs. CCC Annualized Returns (%) BB Return and Risk Within High Yield January 31, 1991 to December 31, 1993 B CCC Volatility* (%) Annualized Annualized Return/Risk Sharpe Return (%) Std Dev (%) Ratio Ratio BB B CCC *Annualized standard deviation of monthly returns
3 A Credit-Risk-Neutral Analysis Further Supports BB s Underlying Value A more rigorous analysis further underscores the inherent value in the upper tier of high yield. Even on a purely credit-risk-adjusted basis versus US Treasuries, the BB sector of the high yield market has historically outperformed the market s expectations. By comparing the excess return over Treasuries, BB-rated corporates outperformed both investment grade and B-rated bonds from 1989 to present. Historical Excess Return and Standard Deviation vs. US Treasuries January 1989 to December 2002 BB Corp Inv Grade Corp B Corp Annualized Excess Return (%) Annualized Standard Deviation (%) Information Ratio The relative outperformance of BB-rated corporates over investment grade and B-rated corporates varies significantly over time. This variation is due to an effect of the credit cycle: BB-rated corporates have a tendency to outperform investment grade corporates (but not B-rated corporates) in bullish environments and outperform B-rated corporates (but not investment grade) in bearish ones Bearish Historical Rolling 12-Month Excess Returns Bullish Bearish Bullish Bearish Percent BB minus B BB minus IG To adjust for this credit cycle effect, we examined the performance of BB-rated corporates versus a barbell portfolio made up of the B-rated corporates and investment grade corporates. The investment grade and B-rated corporates were weighted so that the portfolio had the same credit cycle sensitivity as BB-rated corporates. We estimated the weights for the full period (1/89-12/02) of the barbell portfolio to be 57% investment grade and 43% B-rated corporates. 3
4 As shown below, for most of the historical period, with the notable exception of the most recent months of 2002, BB-rated corporates outperformed the weighted portfolio of investment grade and B-rated corporates. The underperformance of BB-rated bonds in the middle of 2002 was largely due to the precipitous decline of newly fallen angels, particularly WorldCom, which was rated BB for a very brief time. Historical Excess Return and Standard Deviation BB minus Barbell (of Investment Grade & B-Rated) January 1989 to December 2002 BB minus BB Corp Inv Grade B Corp Barbell Annualized Excess Return (%) Annualized Standard Deviation (%) Sharpe Ratio Weights in Barbell Historical Rolling 12-Month Excess Returns BB minus Barbell (of Investment Grade & B-Rated) 8 6 Percent
5 What Are the Fundamental Drivers of BB Outperformance? The empirical results are compelling. We offer our theses regarding the fundamental market behavior and trends that may be driving the BB-rated corporate outperformance: 1. A Lack of Natural Buyers Investment grade portfolio managers generally may be constrained from purchasing BB-rated corporates because of investment guideline restrictions on high yield securities or insurance company risk capital regulations. On the other hand, typical high yield mutual funds, which have traditionally been sold on yield, may not find BB-rated corporates as attractive as B-rated corporates due to their lower yield levels. This lack of natural buyers for BB-rated corporate bonds generates a tendency for BB-rated corporates to be undervalued and, therefore, to outperform. 2. Fallen Angel Effect This market segmentation among buyers exaggerates the effect of a downgrade from investment grade to BB. If an investment grade bond is downgraded to BB, investment grade portfolio managers often must sell the bond. Further, they must sell into a relatively small high yield market, resulting in a very attractive price to the limited number of buyers. This effect is exacerbated by the typically large amount of debt entering the high yield market. Alternatively, BB-rated corporates that experience credit improvement or benefit via mergers and acquisitions activity can experience considerable price improvement upon upgrade to investment grade. 3. Positive Credit Migration BBs have historically experienced more favorable credit migration trends than other corporate quality sectors. Other quality tiers have experienced a greater proportion of downgrades to upgrades. Perhaps one reason for this anomaly is the significant reduction in interest expense for issuers upon becoming investment grade. Companies that are just below investment grade are therefore motivated to improve their credit standing. Positive merger and acquisition activity (e.g. being taken over by an investment grade company) has also disproportionately benefited BB-rated companies in the past. 4. Lower Default Rates BBs have also experienced much lower default rates than the other high yield quality tiers, and in some cases, such as in 2002, the BB default rate has been nearly the same as the BBB default rate. Percent of Issues Defaulted Average Annual Default Rates Average Default Rate ( ) 2002 Default Rate 0 Baa Source: Moody s Ba B Credit Rating Caa-C 5
6 IS NOW A REASONABLE TIME TO CONSIDER SUCH A STRATEGY? Low Treasury Yields May Be Here to Stay Obviously, US Treasuries provide (ultimate) safety of principal and generally offer excellent diversification away from risky asset classes such as equities. However, the 20-year bull market in government bonds both in the US and most developed overseas markets has left global government bond yields at historic lows and prospective returns largely unattractive. In fact, several ingrained long run demographic trends (e.g. the aging of developed country populations) favor a low interest rate environment for many years to come. 11 -Year US Government Bond Yields 9 Percent Source: Bloomberg. While High Yield Spreads are Still Wide by Historical Standards Despite the recent narrowing in corporate credit spreads, the situation in the corporate credit sectors of the fixed income market is largely the mirror image of that in the Treasury market. Certain investment grade corporate bonds, many high yield corporate bonds, and even select emerging market debt securities still offer generous yields, particularly in relation to their much richer government bond brethren. Indeed, the volatile credit environment over the past several years has caused yield spreads and yield ratios on high yield bonds to remain at historically wide levels Corporate Yields as a Percent of Treasury Yield HY YTW Ba YTW Percent Source: Lehman Brothers, Bloomberg and Prudential Investment Management internal calculations 6
7 PUTTING THESE OBSERVATIONS TO USE IN YOUR PORTFOLIO BBs Can Provide Diversification The high yield market marches to the beat of its own drum. It is not highly correlated with other asset classes over long periods, (but, of course, exhibits varying degrees of correlation with equities and high grade fixed income securities at different points in time). BBs are ideal for traditional investors who desire incremental returns but want to limit the equity-like behavior (i.e. volatility) of their portfolios. Moreover, relative to the middle and lower quality tiers of the high yield market, BB-rated bonds will behave more like fixed income securities. Correlation Matrix 1983 to Present Lehman Lehman BB B CCC S&P 500 Agg Index HY Index Corp Corp Corp Index Lehman Agg Index 0% 37% 51% 34% 13% 24% Lehman HY Index BB Corp B Corp CCC Corp 0 40 S&P 500 Index 0 Source: Lehman Brothers, Bloomberg, Prudential Investment Management internal calculations Which Leads to Lower Overall Portfolio Volatility From a portfolio structuring perspective, high yield is an excellent diversifier. It can increase returns and decrease risk, or volatility. This holds true when adding BBs to a high grade fixed income portfolio or to a traditional portfolio of high grade bonds and equities..00 Risk and Return of an Investment Grade Portfolio with BBs 1983 to Present Average Annualized Portfolio Return (%) % BB, 65% Agg. 30% BB, 70% Agg. 40% BB, 60% Agg. 25% BB, 75% Agg. 20% BB, 80% Agg. 45% BB, 55% Agg. 15% BB, 85% Agg. 50% BB, 50% Agg. % BB, 90% Agg. 5% BB, 95% Agg. 0% Agg Portfolio Volatility* (%) Source: Lehman Brothers, Bloomberg, Prudential Investment Management internal calculations *Annualized standard deviation of monthly returns 7
8 For example, if we add increasing amounts of BB-rated bonds to a Lehman Aggregate bond portfolio, we find that returns increase, while portfolio volatility decreases. The minimum volatility mix of 70% Lehman Aggregate and 30% BB-rated bonds provides a return 21 basis points higher than the 0% Lehman Aggregate portfolio with lower volatility. Summary In many regards, the upper tier of the high yield market BB-rated and quality B-rated bonds may be a solution to plan sponsors looking to enhance return with a reasonable risk trade-off. As we have demonstrated, BB-rated bonds may be the sweet spot of the corporate bond market. They have historically offered attractive returns with a modest amount of volatility, income with few defaults, and a diversification benefit via their moderate correlations with other asset classes. The author wishes to recognize Yves Trinquet, Kathy Chang and Alyssa Davis for their contributions to the quantitative analysis used as a basis for this article. Copyright 2003, Prudential Investment Management, Inc. Prudential Financial is a service mark of The Prudential Insurance Company of America, Newark, NJ and its affiliates. Prudential Investment Management, Inc., a registered investment adviser and a Prudential Financial company. The comments, opinions and estimates contained herein are based on or derived from publicly available information from sources that Prudential Investment Management believes to be reliable. We do not guarantee their accuracy. This material, which is for informational purposes only, sets forth our views as of this date. The underlying assumptions and these views are subject to change. Past performance is not indicative of future results. The information and opinions herein re not to be construed as an offer to sell or the solicitation of an offer to buy any security or security type. PIM
The enduring case for high-yield bonds
November 2016 The enduring case for high-yield bonds TIAA Investments Kevin Lorenz, CFA Managing Director High Yield Portfolio Manager Jean Lin, CFA Managing Director High Yield Portfolio Manager Mark
More informationThe Case for Short-Maturity, Higher Quality, High Yield Bonds
PRUDENTIAL INVESTMENTS» MUTUAL FUNDS A WHITE PAPer FROM PrudenTial Fixed Income The Case for Short-Maturity, Higher Quality, High Yield Bonds The institutional asset managers behind Prudential Investments
More informationBB credit: A sweet spot?
BB credit: A sweet spot? In a low-yielding environment, how can institutional investors best achieve adequate returns on fixed income? Ty Anderson Global Head of High Yield Strategies evaluates how credit
More informationFixed-Income Insights
Fixed-Income Insights The Appeal of Short Duration Credit in Strategic Cash Management Yields more than compensate cash managers for taking on minimal credit risk. by Joseph Graham, CFA, Investment Strategist
More informationThe Evolution of High-Yield Bonds into a Vital Asset Class
Allianz Global Investors White Paper Series The Evolution of High-Yield Bonds into a Vital Asset Class 07/2016 Executive Summary With high-quality bond yields near all-time lows, investors have looked
More informationA Guide to Investing In Corporate Bonds
A Guide to Investing In Corporate Bonds Access the corporate debt income portfolio TABLE OF CONTENTS What are Corporate Bonds?... 4 Corporate Bond Issuers... 4 Investment Benefits... 5 Credit Quality and
More informationConvertible Bonds: A Tool for More Efficient Portfolios
Wellesley Asset Management Fall 2017 Publication Convertible Bonds: A Tool for More Efficient Portfolios Michael D. Miller, Chief Investment Officer Contents Summary: It s Time to Give Convertible Bonds
More informationStrategic Allocaiton to High Yield Corporate Bonds Why Now?
Strategic Allocaiton to High Yield Corporate Bonds Why Now? May 11, 2015 by Matthew Kennedy of Rainier Investment Management HIGH YIELD CORPORATE BONDS - WHY NOW? The demand for higher yielding fixed income
More informationMarket Focus. Credit cycle: rising default rate. Where do we stand in the default rate cycle? Credit fundamentals are deteriorating
At the beginning of 215, we began forecasting the end of the credit cycle. Since then, corporate fundamentals, rating trends, and default rate data have all deteriorated. Moody s speculative default rate
More informationThe case for lower rated corporate bonds
The case for lower rated corporate bonds Marcus Pakenham Fixed income product specialist December 3 Introduction Where should fixed income investors be positioned over the medium term? We expect that government
More informationAn Introduction to Bonds
An Introduction to Bonds Agenda Bond basics Different types of bonds Bond features Yield and tax considerations Bond risks Credit quality Bond investing strategies and client suitability Defining Characteristics
More informationLeveraged Bank Loans. Prudential Investment Management-Fixed Income. Leveraged Loans: Capturing Investor Attention July 2006
Prudential Investment Management-Fixed Income Leveraged Loans: Capturing Investor Attention July 2006 Timothy Aker Head of US Bank Loan Team Martha Tuttle Portfolio Manager, US Bank Loan Team Brian Juliano
More informationQuarterly High Yield Market Summary
Quarterly High Yield Market Summary As of December 31, 2013 Aside from a brief respite in October, risk free rates trended higher in Q4 2013 (up 42 basis points in the 10 Year and 36 bps in the 5 Year),
More informationBank Loans: Looking Beyond Interest Rate Expectations
Bank Loans: Looking Beyond Interest Rate Expectations November 13, 2012 by John Bell and Kevin Perry Fixed income investors may be stymied by the current mix of interest rate projections and global macroeconomic
More informationHIGH-YIELD CORPORATE BONDS
HIGH-YIELD (Agreement of Purchaser) Account Name Account Number Rep. No. HY I/We represent and agree as follows: Piper Jaffray Copy Terms. I or me means the client(s). You means Piper Jaffray. High-Yield
More informationPorter, White & Company
Porter, White & Company Considering Investment Grade Corporate Fixed Income Asset Class White Paper, July 2009, Number IM 23.1 I. 0BPurpose Fixed income investments are frequently utilized to reduce risk
More informationEuropean crossover bonds. A sweet spot?
European crossover bonds A sweet spot? Demand for crossover credit Record low government bond yields and extraordinary easing measures in the aftermath of the global financial crisis have facilitated the
More informationRisk and Term Structure of Interest Rates
Risk and Term Structure of Interest Rates Economics 301: Money and Banking 1 1.1 Goals Goals and Learning Outcomes Goals: Explain factors that can cause interest rates to be different for bonds of different
More informationPRINCIPAL VARIABLE CONTRACTS FUNDS, INC.
PRINCIPAL VARIABLE CONTRACTS FUNDS, INC. Class 1 and Class 2 Shares ("PVC" or the "Fund ) The date of this Prospectus is May 1, 2017, as revised May 2, 2017 and previously supplemented on May 2, 2017.
More informationM Intelligence. Mutual Life Insurance Company Dividend Rates for 2018
Enhancing understanding of sophisticated planning strategies and their applications. For 2018, the four major mutual companies held the dividend interest rates on their participating whole life (WL) insurance
More informationThe Case for A Rated Issuers
The Case for A Rated Issuers August 31, 2012 PFM Asset Management LLC One Keystone Plaza, Suite 300 N. Front & Market Sts Harrisburg, PA 17101 (717) 232-2723 Contents Tab I Overview of the Corporate Market
More informationPERSPECTIVES. Multi-Asset Investing Diversify, Different. April 2015
PERSPECTIVES April 2015 Multi-Asset Investing Diversify, Different Matteo Germano Global Head of Multi Asset Investments In the aftermath of the financial crisis, largely expansive monetary policies and
More informationJuly 2015 Private Client Advisor Alert
Whole Life Dividend Interest Rates for 2015 Near the end of each calendar year, mutual insurance companies declare their dividend interest rates on participating whole life (WL) insurance policies for
More informationMuni Bond Update: Improved Finances Drive Strong Quarter
On Our Website: www.alliancebernstein.com Posted August 5 Muni Bond Update: Improved Finances Drive Strong Quarter By David Dowden, Senior Portfolio Manager, and Terrance T. Hults, Senior Portfolio Manager
More informationin-depth Invesco Actively Managed Low Volatility Strategies The Case for
Invesco in-depth The Case for Actively Managed Low Volatility Strategies We believe that active LVPs offer the best opportunity to achieve a higher risk-adjusted return over the long term. Donna C. Wilson
More informationLooking past the abyss 穿越市場陰霾
January 2012 Looking past the abyss 穿越市場陰霾 -- 2012 Outlook Issued by The Hongkong and Shanghai Banking Corporation Limited Market Overview Market performance in 2011 Equities Fixed Income Source: Morningstar
More informationIncorporating Alternatives in an LDI Growth Portfolio
INSIGHTS Incorporating Alternatives in an LDI Growth Portfolio June 2015 203.621.1700 2015, Rocaton Investment Advisors, LLC EXECUTIVE SUMMARY * The primary objective of a liability driven investing growth
More informationDefensive Floating Rate Loans
Specialists in Complete Capital Structure Analysis David Jackson, CFA Senior Portfolio Manager, Senior Partner Randall Braunfeld Senior Research Analyst, Partner Matthew Bogdan Quantitative Research Analyst
More informationCovered Call Investing and its Benefits in Today s Market Environment
ZIEGLER CAPITAL MANAGEMENT MARKET INSIGHT & RESEARCH Covered Call Investing and its Benefits in Today s Market Environment Covered Call investing has attracted a great deal of attention from investors
More informationHigh-Yield Bonds: Equity-Like Returns Without Equity-Like Volatility
High-Yield Bonds: Equity-Like Returns Without Equity-Like Volatility April 4, 2015 by Michael Weilheimer, Steve Concannon, Will Reardon of Eaton Vance A timeless (and timely) case for high-yield bonds
More informationPutting International Small-Caps On the Map The Case for Allocating to International Small-Cap Stocks
ROYCE RESEARCH FINANCIAL PROFESSIONALS ONLY Putting International Small-Caps On the Map The Case for Allocating to International Small-Cap Stocks Our goal in this paper is to provide an introduction for
More informationCorrelation and Asset Management
Correlation and Asset Management Michael Mendelson Principal Ernst Schaumburg Vice President May 2017 AQR Capital Management, LLC Two Greenwich Plaza Greenwich, CT 06830 p: +1.203.742.3600 w: aqr.com 1
More informationPractical Solutions for Today s Bond Markets VIRTUS SEIX LEVERAGED FINANCE FUNDS
Practical Solutions for Today s Bond Markets VIRTUS SEIX LEVERAGED FINANCE FUNDS The Challenge In a market environment defined by low yields, volatility, and rising interest rates, investors are seeking
More informationInvestment Grade Corporates Positioned for the New Reality
Investment Grade Corporates Positioned for the New Reality The Case for Investment Grade Corporates 1 The global financial crisis altered the growth profile for the global economy, resulting in a new era
More informationBuilding a Resilient Fixed Income Portfolio for all Stages of the Economic Cycle
Building a Resilient Fixed Income Portfolio for all Stages of the Economic Cycle Matthew J. Eagan, CFA, Vice President and Portfolio Manager, Fixed Income, Loomis, Sayles & Company Kevin P. Kearns, Vice
More informationHigh Yield. LarrainVial Seminario Mercados Globales - Ideas Hans Stoter Head of Credit Investments ING Investment Management
High Yield Hans Stoter Head of Credit Investments ING Investment Management LarrainVial Seminario Mercados Globales - Ideas 2010 Santiago, Lima May 11 13, 2010 What is High Yield Corporate debt with rating
More informationSenior Floating Rate Loans: The Whole Story
Senior Floating Rate Loans: The Whole Story Mutual fund shares are not guaranteed or insured by the FDIC, the Federal Reserve Board or any other agency. The investment return and principal value of an
More informationLOST OPPORTUNITIES HOW THE ROLE OF BBBS IS CHANGING IN CANADIAN DEBT MARKETS
LOST OPPORTUNITIES HOW THE ROLE OF BBBS IS CHANGING IN CANADIAN DEBT MARKETS CARLO DILALLA, CFA, Vice-President & Senior Client Portfolio Manager Fixed Income Executive Summary The recent downgrade of
More informationDRAFT, For Discussion Purposes. Joint P&C/Health Bond Factors Analysis Work Group Report to NAIC Joint Health RBC and P/C RBC Drafting Group
DRAFT, For Discussion Purposes Joint P&C/Health Bond Factors Analysis Work Group Report to NAIC Joint Health RBC and P/C RBC Risk Charges for Speculative Grade (SG) Bonds May 29, 2018 The American Academy
More informationPositioning Equity Portfolios for When Rates Rise
October 2017 Positioning Equity Portfolios for When Rates Rise The current equity bull market is now more than eight years old and has survived several calls for its demise. So far, it has weathered economic
More informationBentham High Yield Fund
Bentham High Yield Fund Quarterly Commentary June 2010 Responsible entity Challenger Investment Services Limited ABN 44 119 605 376 AFSL 320505 Performance The Bentham High Yield Fund (the Fund ) returned
More informationPerspectives July. Liability-Driven Perspectives. A Tale of Two Recessions. Liabilities Do Not Have Downgrade Risk, Bonds Do
PGIM FIXED INCOME Perspectives July 2015 Liability-Driven Perspectives A Tale of Two Recessions The Effect of Credit Migration on Liability-Driven Investment Portfolios Tom McCartan Vice President, Liability-Driven
More informationCopyright 2004 Pearson Education, Inc. All rights reserved. Bonds
Copyright 2004 Pearson Education, Inc. All rights reserved. Bonds What is a Bond? Debt securities that may pay a rate of interest based upon the face amount or par value of the bond Bond investors receive
More informationBUILDING INVESTMENT PORTFOLIOS WITH AN INNOVATIVE APPROACH
BUILDING INVESTMENT PORTFOLIOS WITH AN INNOVATIVE APPROACH Asset Management Services ASSET MANAGEMENT SERVICES WE GO FURTHER When Bob James founded Raymond James in 1962, he established a tradition of
More informationAlternative Thinking 4Q17. The Illusion of Active Fixed Income Diversification
Alternative Thinking 4Q17 The Illusion of Active Fixed Income Diversification 02 The Illusion of Active Fixed Income Diversification 4Q17 Contents Table of Contents 02 Executive Summary 03 Introduction
More informationUnderstanding Investments in Collateralized Loan Obligations ( CLOs )
Understanding Investments in Collateralized Loan Obligations ( CLOs ) Disclaimer This document contains the current, good faith opinions of Ares Management Corporation ( Ares ). The document is meant for
More informationHolding the middle ground with convertible securities
March 2017 Eric N. Harthun, CFA Portfolio Manager Robert L. Salvin Portfolio Manager Holding the middle ground with convertible securities Convertible securities are an often-overlooked asset class. Over
More informationThe Outlook For Emerging Markets Stocks
Page 1 of 5 Printed and electronic copies are for personal use. Any unauthorized distribution by fax, email or any other means is prohibited and is in violation of copyright. If you are interested in redistribution,
More informationTrading Volatility: Theory and Practice. FPA of Illinois. Conference for Advanced Planning October 7, Presented by: Eric Metz, CFA
Trading Volatility: Theory and Practice Presented by: Eric Metz, CFA FPA of Illinois Conference for Advanced Planning October 7, 2014 Trading Volatility: Theory and Practice Institutional Use Only 1 Table
More informationFixed Income Investing in a Low Yield World: High Yield Bonds Still Part of the Solution. Fall 2012
Fixed Income Investing in a Low Yield World: High Yield Bonds Still Part of the Solution Fall 2012 U.S. 10-Year Treasury Yields October 5, 2012 16 14 12 10 8 6 4 2 1.74% 0 Jan-82 Feb-86 Mar-90 May-94 Jun-98
More informationQuantifying credit risk in a corporate bond
Quantifying credit risk in a corporate bond Srichander Ramaswamy Head of Investment Analysis Beatenberg, September 003 Summary of presentation What is credit risk? Probability of default Recovery rate
More informationCounterparty Credit Default Swap Rates
Counterparty Credit Default Swap Rates 1 December 2017 This information is for financial advisers only and should not be presented to, or relied upon by, private investors. 1 Credit default swaps Bloomberg/Meteor
More informationCounterparty Credit Default Swap Rates
Counterparty Credit Default Swap Rates 22 June 2018 This information is for financial advisers only and should not be presented to, or relied upon by, private investors. 1 Credit default swaps Bloomberg/Meteor
More informationTARGET EXCESS YIELD SUITE
TARGET EXCESS YIELD SUITE MARCH 2015 Newfound Case ID: 3377056 1 THE NEWFOUND MISSION Newfound Research s product suite has been designed to balance the desire to pursue growth with the need to avoid large
More informationA More Conservative Approach to High Yield Opportunities
FUND performance Analysis APRIL 2010 www.calamos.com Calamos Financial Services LLC, Distributor High Yield Fund Fund Ticker Symbols A Shares B Shares C Shares I Shares CHYDX CAHBX CCHYX CIHYX > Performance
More informationCounterparty Credit Default Swap Rates
Counterparty Credit Default Swap Rates 20 April 2018 This information is for financial advisers only and should not be presented to, or relied upon by, private investors. 1 Credit default swaps Bloomberg/Meteor
More informationCounterparty Credit Default Swap Rates
Counterparty Credit Default Swap Rates 27 April 2018 This information is for financial advisers only and should not be presented to, or relied upon by, private investors. 1 Credit default swaps Bloomberg/Meteor
More informationCounterparty Credit Default Swap Rates
Counterparty Credit Default Swap Rates 13 April 2018 This information is for financial advisers only and should not be presented to, or relied upon by, private investors. 1 Credit default swaps Bloomberg/Meteor
More informationAdvisor Briefing Why Alternatives?
Advisor Briefing Why Alternatives? Key Ideas Alternative strategies generally seek to provide positive returns with low correlation to traditional assets, such as stocks and bonds By incorporating alternative
More informationThe Preferred Market: An Overview
The Preferred Market: An Overview May 2016 Visit our website: www.chiltontrustcompany.com Richard L. Chilton, Jr. Chairman & CIO Equities 212-443-7800 rchilton@chiltontrust.com Timothy W.A. Horan CIO Fixed
More informationHSBC Global Asset Management, India Creating Wealth through Asset Allocation. March 2018
HSBC Global Asset Management, India Creating Wealth through Asset Allocation March 2018 1 Why invest? 2 Changing social demographics Stress at work leading to early retirement People are living longer
More informationMid Cap Value Fiduciary Services EARNEST Partners, LLC
EARNEST Partners, LLC 1180 Peachtree St. - Suite 2300 Atlanta, Georgia 30309 Style: Sub-Style: Firm AUM: Firm Strategy AUM: US Mid Cap Value Traditional Value $20.1 billion $64.0 billion Year Founded:
More informationBMO Global Absolute Return Bond Fund
For professional investors only BMO Global Absolute Return Bond Fund Seeks to deliver a cash plus 3% return through the business cycle Things to look for in Absolute Return Fixed Income Diversified return
More informationCREDIT RATINGS. Rating Agencies: Moody s and S&P Creditworthiness of corporate bonds
CREDIT RISK CREDIT RATINGS Rating Agencies: Moody s and S&P Creditworthiness of corporate bonds In the S&P rating system, AAA is the best rating. After that comes AA, A, BBB, BB, B, and CCC The corresponding
More informationWells Fargo High Yield Bond Fund
All information is as of 9-30-17 unless otherwise indicated. General fund information Ticker: EKHIX Portfolio manager: Margaret D. Patel Subadvisor: Wells Capital Management Inc. Category: High-yield bond
More informationResilience of Convertibles in Economic Recessions
2017 Inc. October 2017 Resilience of Convertibles in Economic Recessions By: Ethan Ganz, Portfolio Manager As Q3 2017 came to a close, equity investors booked another quarter of impressive returns, with
More informationMapping of the FERI EuroRating Services AG credit assessments under the Standardised Approach
30 October 2014 Mapping of the FERI EuroRating Services AG credit assessments under the Standardised Approach 1. Executive summary 1. This report describes the mapping exercise carried out by the Joint
More informationConvertible bonds and solvency capital constrained investments
For Professional Use Only FocusPoint In-depth insights from NN Investment Partners A detailed look at the treatment of convertible bonds under the new Solvency II regulatory regime for European insurers.
More informationInvesting Handbook. Portfolio, Action & Research Team. Understanding the Three Major Asset Classes: Cash, Bonds and Stocks
2013 Portfolio, Action & Research Team Investing Handbook Understanding the Three Major Asset Classes: Cash, Bonds and Stocks Stéphane Rochon, CFA, Equity Strategist Natalie Robinson, Data Research and
More informationWHITE PAPER Dynamic Asset Correlations During Times of Market Stress
WHITE PAPER Dynamic Asset Correlations During Times of Market Stress For Consideration in Portfolio Construction Diversification Challenges Acknowledging Dynamic Correlation Correlation is a common metric
More informationDo we have a credit supply problem?
Do we have a credit supply problem? Newsletter June 218 9,54 The number of US corporate bonds rated by a major credit rating agency According to a 212 report published by the SEC 1, Standard & Poor s provided
More informationRisk-Efficient Investment Portfolios from AlphaSimplex Group. Strategies that put risk management first
Risk-Efficient Investment Portfolios from AlphaSimplex Group Strategies that put risk management first Agenda About AlphaSimplex Group (ASG) The need for active risk management Introducing the AlphaSimplex
More informationHow are you adapting to a changing muni landscape?
EATON VANCE FEBRUARY 2018 CORNERSTONES OF TAX-SMART INVESTING How are you adapting to a changing muni landscape? A professionally managed, laddered approach to municipal bonds may make sense now. SUMMARY
More informationMan Group Stock Performance. US$ Per Share 35
Panel Sponsored by: Man Group Stock Performance US$ Per Share 35 30 25 20 15 10 5 0 95 96 97 98 99 00 01 02 03 What is a Hedge Fund? The term "hedge fund" is not formally defined by federal securities
More informationInvestment Insight. Are Risk Parity Managers Risk Parity (Continued) Summary Results of the Style Analysis
Investment Insight Are Risk Parity Managers Risk Parity (Continued) Edward Qian, PhD, CFA PanAgora Asset Management October 2013 In the November 2012 Investment Insight 1, I presented a style analysis
More informationThoughts on Recent Market Volatility
Monthly Market Snapshot AUGUST 2016 Portfolio Strategy Global Portfolio Advisory Group Thoughts on Recent Market Volatility October 11, 2018 Hold Steady Recent market volatility is attributable to several
More informationSupplement dated November 20, 2008 to the Class A Shares, Class B Shares and Class C Shares Prospectuses
Supplement dated November 20, 2008 to the Class A Shares, Class B Shares and Class C Shares Prospectuses Dated November 1, 2008 VAN KAMPEN CAPITAL GROWTH FUND VAN KAMPEN SERIES FUND, INC., on behalf of
More informationCan We Lower Portfolio Volatility and Still Meet Equity Return Expectations?
Can We Lower Portfolio Volatility and Still Meet Equity Return Expectations? Richard Yasenchak, CFA Senior Vice President, Client Portfolio Manager, INTECH FOR INSTITUTIONAL INVESTOR USE/NOT FOR PUBLIC
More informationFOR 2018 GLOBAL MARKET OUTLOOK PRESS BRIEFING. PROVIDED TO DESIGNATED MEMBERS OF THE PRESS ONLY, NOT FOR FURTHER DISTRIBUTION.
2018 Global Market Outlook Press Briefing GLOBAL FIXED INCOME Mark Vaselkiv Portfolio Manager, CIO, Fixed Income November 14, 2017 FOR 2018 GLOBAL MARKET OUTLOOK PRESS BRIEFING. PROVIDED TO DESIGNATED
More informationActive Fixed Income Management ADDING VALUE WITH ACTIVELY MANAGED BOND PORTFOLIOS
PRICE PERSPECTIVE September 017 In-depth analysis and insights to inform your decision-making. Active Fixed Income Management ADDING VALUE WITH LY MANAGED BOND PORTFOLIOS EXECUTIVE SUMMARY Although actively
More informationInvesting for income in a time of low interest rates PARTNERS IN MANAGING YOUR WEALTH 1 INVESTING FOR INCOME
Investing for income in a time of low interest rates PARTNERS IN MANAGING YOUR WEALTH 1 Contents 3 Introduction 4 Fixed interest 6 Corporate bonds 9 Gilts 10 Equities 13 Commercial property 14 Risk and
More informationChapter 11. Section 2: Bonds & Other Financial Assets
Chapter 11 Section 2: Bonds & Other Financial Assets Bonds as Financial Assets Bonds are basically loans, or IOUs, that represent debt that the government or a corporation must repay to an investor. Typically
More informationNavigator Taxable Fixed Income
CCM-17-09-966 As of 9/30/2017 Navigator Taxable Fixed Navigate Fixed with Individual Bonds With yields hovering at historic lows, an active strategy focused on managing risk may deliver better client outcomes
More informationIncome Solutions Beyond Investment Grade Bonds
October 2017 Income Solutions Beyond Investment Grade Bonds Multiple Fixed Income Approaches Direction of interest rates Reduce Duration Limit Duration to Near Zero with: Floating rate notes (FRNs) for
More informationBMO Global Absolute Return Bond Fund
For professional / regulated qualified investors only BMO Global Absolute Return Bond Fund Targeting the sweet spot for absolute return bonds Things to look for in Absolute Return Fixed Income Diversified
More informationButterflies, Condors and Risk Limiting Strategies. The Options Industry Council
Butterflies, Condors and Risk Limiting Strategies December 17, 2013 Joe Burgoyne, OIC www.optionseducation.org 2 The Options Industry Council Options involve risks and are not suitable for everyone. Prior
More informationAsset manager profiles
SECTION 1 Asset manager profiles John Hancock New York All financial obligations under the group annuity contract are the sole obligation of John Hancock Life Insurance Company of New York. 4 Committed
More informationDefined Benefit Plans and Hedge Funds: Enhancing Returns and Managing Volatility. By introducing a hedge
By introducing a hedge fund allocation to their portfolios, DB plans may be able to reduce volatility and increase downside protection. Alessandra Tocco Global Head of Capital Introduction Defined Benefit
More informationSpotlight on: 130/30 strategies. Combining long positions with limited shorting. Exhibit 1: Expanding opportunity. Initial opportunity set
INVESTMENT INSIGHTS Spotlight on: 130/30 strategies Monetizing positive and negative stock views Managers of 130/30 portfolios seek to capture potential returns in two ways: Buying long to purchase a stock
More informationWells Fargo Short-Term High Yield Bond Fund
All information is as of 12-31-17 unless otherwise indicated. General fund information Ticker: STYIX Portfolio manager: Thomas Price, CFA; Kevin Maas, CFA; Michael Schueller, CFA Subadvisor: Wells Capital
More informationNATIONWIDE ASSET ALLOCATION INVESTMENT PROCESS
Nationwide Funds A Nationwide White Paper NATIONWIDE ASSET ALLOCATION INVESTMENT PROCESS May 2017 INTRODUCTION In the market decline of 2008, the S&P 500 Index lost more than 37%, numerous equity strategies
More informationDeconstructing Dividends: Five Reasons to Consider Small- and Mid-Cap Dividend-Paying Stocks
Deconstructing Dividends: Five Reasons to Consider Small- and Mid-Cap Dividend-Paying Stocks Dividend-paying stocks historically outperform the market with less risk and low correlation with other investment
More informationMunicipal Bond Basics
Weller Group LLC Timothy Weller, CFP CERTIFIED FINANCIAL PLANNER 6206 Slocum Road Ontario, NY 14519 315-524-8000 tim@wellergroupllc.com www.wellergroupllc.com Municipal Bond Basics March 06, 2016 Page
More informationThe credit spread barbell: Managing credit spread risk in pension investment strategies
The credit spread barbell: Managing credit spread risk in pension investment strategies Vanguard Research February 2018 Brett B. Dutton, CFA, FSA, lead investment actuary, Vanguard Institutional Advisory
More informationCredit Risk II. Bjørn Eraker. April 12, Wisconsin School of Business
Wisconsin School of Business April 12, 2012 More on Credit Risk Ratings Spread measures Specific: Bloomberg quotes for Best Buy Model of credit migration Ratings The three rating agencies Moody s, Fitch
More informationFinancial Literacy Series Investing
Financial Literacy Series Investing January 31, 2018 Robert Turnquest, CFA, CAIA Agenda What is investing? Types of investments Stocks Bonds Mutual funds Developing your personal portfolio Risk vs. return
More informationTime to adjust the sails
Time to adjust the sails EXECUTIVE SUMMARY 2018 Mid-Year Capital Market Outlook Brent Joyce CFA Chief Investment Strategist Andrew O Brien CFA Manager, Investment Strategy The World At Large The pessimist
More informationPreferred Shares Alex Kastanis, CFA. December 2016
Preferred Shares Alex Kastanis, CFA December 2016 Why Invest in Preferred Shares Regular Dividend Payment Revenue that is fiscally advantageous Priority over common shares (bankruptcy) Different structures
More informationVolatility-Managed Strategies
Volatility-Managed Strategies Public Pension Funding Forum Presentation By: David R. Wilson, CFA Managing Director, Head of Institutional Solutions August 24, 15 Equity Risk Part 1 S&P 5 Index 1 9 8 7
More informationTurner Investments 1205 Westlakes Drive - Suite 100 Berwyn, Pennsylvania 19312
Turner Investments 1205 Westlakes Drive - Suite 100 Berwyn, Pennsylvania 19312 PRODUCT OVERVIEW The investment objective of the Turner Select portfolio is to outperform the Russell 1000 Growth Index over
More information