Perspectives Blog

Does a perfect policy portfolio exist?

Jeffrey Knight, CFA, Global Head of Investment Solutions and Asset Allocation | May 5, 2014

…cy portfolio that can withstand any market conditions. So is it the perfect policy portfolio? We don’t think so. Risk Parity has contributed two breakthrough ideas to the practice of asset allocation. The first is the technique of measuring risk allocation as opposed to capital allocation. For example, a portfolio with 60% of its assets in equities and 40% of its assets in bonds might seem balanced, but in risk allocation terms it is anything but…

2015 Outlook — Same song, slightly different arrangement

Jeffrey Knight, CFA, Global Head of Investment Solutions and Asset Allocation | December 15, 2014

…inst them. The comparison favors equities more strongly for 2015 Exhibit 3: Equity markets offer higher expected risk-adjusted returns than bonds Exhibit 3 depicts our valuation landscape for selected global assets as 2015 begins. The graph plots the expected return vs. risk for selected assets around the world, based on Columbia Management proprietary estimates. For each asset, the expected return (proxied by yield-to-maturity for bonds and by…

The end of “risk-on/risk-off”

Anwiti Bahuguna, Ph.D., Senior Portfolio Manager | February 3, 2014

…ducing the benefits of cross-regional diversification. Similarly, correlation between equities and high yielding bonds rose from about 50% to over 80%. When investors took risk, most assets rallied with the exception of sovereign bonds. Conversely, when risk sold off, only sovereign bonds had positive returns. This risk-on/risk-off regime posed a problem for multi-asset portfolios as many of the traditional diversifiers of equities increasingly b…

Why pay a premium for municipal bonds?

Columbia Management Municipal Investment Team, | December 18, 2014

The advantages of buying municipal bonds at a premium What are premium, par and discount bonds? Premium bonds carry a coupon rate that is higher than current market interest rates and have a market value above 100 cents on the dollar. Par bonds carry a coupon rate equal to current market interest rates and trade at or near 100 cents on the dollar. Discount bonds carry a coupon rate that is lower than current market interest rates and trade belo…

Do you know what’s in your short-term bond fund?

Columbia Management, Investment Team | December 1, 2014

High-quality short-term bond funds can provide attractive returns for investors seeking a conservative investment option in today’s uncertain interest rate environment. Not all short-term bond funds are created equal. Some managers take reasonable, well-diversified risks; others may be tempted to chase yield, with the results being risks that may exceed investor tolerance. Know what you own! By Leonard Aplet, CFA, Head of Short-Duration Fixed…

A port in the storm — Short muni funds can offer refuge in the face of rising rates

Catherine Stienstra, Senior Portfolio Manager | October 2, 2014

…ssuers may necessitate the fund investing more heavily in a single issuer and, therefore, be more exposed to the risk of loss than a fund that invests more broadly. Prepayment and extension risk exists as a loan, bond or other investment may be called, prepaid or redeemed before maturity and that similar yielding investments may not be available for purchase. Market risk may affect a single issuer, sector of the economy, industry or the market as…

Ghost of crises past

Jay Leopold, Head, U.S. Investment Risk | October 27, 2014

…he past month. Exhibit 1: CBOE Volatility Index, October 15, 2014 Source: Columbia Management — U.S. Investment Risk, 10/14 Entering September, equity indices were at all-time records in the U.S. and six-year highs in Europe, while bond spreads were near generational lows. Valuation levels embedded some good news and were moderately rich compared to the past five years, but not compared to a longer historical time series, and certainly not in th…