Perspectives Blog

When do floating rate loans begin to float?

Columbia Management, Investment Team | July 11, 2013

Given the significant and rapid move in Treasury yields over the last month, many investors in the floating rate asset class may be expecting to see higher income distributions. The presence of LIBOR floors in the leveraged loan market today means that investors may end up waiting a little bit longer to realize an uptick in coupon payments. However, relative performance for bank loans has been strong, and this asset class provides important div…

Gut check: The outlook on fixed income

Colin J. Lundgren, CFA, Head of Fixed Income | February 24, 2014

…e we still concerned about rising interest rates? Yes. Looking at the big picture, we are still in the early stages of the Federal Reserve’s (the Fed) exit process. Tapering, or the reduction in asset purchases by the central bank, will likely continue at a steady pace over the course of the year, unless the economy experiences a dramatic shift from its current path. Tapering was the story of 2013 and largely explains the significant rise in inte…

Casting a wider net for income

Columbia Management, Investment Team | May 28, 2013

To generate sufficient investment income in today’s low-yield world, you may need to look at new sources of income. Many corporations are currently awash in cash and offer investment opportunities across the capital structure. Floating rate loans, corporate bonds, convertible securities and dividend-paying stocks each offer specific advantages. In today’s low-yield world, advisors and investors alike are looking for income. And while the…

Quality milestone in the European recovery story

March 17, 2014

Business, economic and political news all point to a strengthening recovery in Europe. We foresee a period of low inflation and low interest rates in Europe. We favor domestic European plays over internationally-exposed stocks, with an overweight stance in banking and telecoms. By Paul Doyle, Head of Europe ex. UK equities and Frederic Jeanmaire, Fund Manager, Threadneedle Investments After 18 consecutive negative months, the flow of eurozone…

Outlook for the leveraged loan market

Columbia Management, Investment Team | June 20, 2013

We find that the leveraged loan market is much healthier today than five years ago and we continue to be constructive on the asset class. Compared to the pre-Great Recession period, the pricing of loans today is much more reasonable in the context of credit risk and corporate fundamentals are stronger. A robust credit review process is a key component of successful investing in this asset class. By Lynn Hopton and Yvonne Stevens, Co-Heads of L…

Navigating rising rates

Columbia Management, Investment Team | June 11, 2013

…tment-grade corporate bonds have an average analytical duration of over six years, but the actual sensitivity to changes in Treasury yields over the past decade has only been about half of that. High-yield corporate bonds and bank loans actually have negative empirical durations, meaning that they have historically posted higher returns during periods of rising Treasury yields. The very low or negative empirical durations highlight that investors…

How bad is China’s credit crisis?

Weili Jasmine Huang, Senior Portfolio Manager | February 3, 2014

We look at the scope and impact of China’s credit crisis We believe the possibility of a financial meltdown is low We discuss how resolution of the crisis may unfold News of a trust product on the brink of default has deepened the concerns of increasing instability of China’s financial system. The risk of defaults on trust and wealth management products will likely continue to impact markets. We believe that the shadow banking issue will…