Perspectives Blog

A primer on preferred securities

Carl Pappo, Head of Core Fixed Income | March 10, 2014

Preferred securities can offer an attractive risk-adjusted yield in a low-yield environment. Straddling the line between fixed income and equity, preferred securities can help diversify core fixed-income portfolios. Investors equipped to analyze and trade these structures are able to find attractive relative value opportunities. Co-authored by Willow Piersol, Senior Analyst As financial institutions raise capital and reduce risk, preferred sec…

Rates rise, convertibles do what?

David King, CFA, Senior Portfolio Manager | August 9, 2013

There is a very common concern that convertible securities will not perform well in a rising interest rate environment. Analysis of past rising rate periods shows that convertible returns have been neutral or positive as long as stock returns were positive. Accordingly, we do not see concern about rising interest rates alone as a good reason to avoid convertible securities. There is a very common concern that convertible securities will not pe…

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…

When do floating rate loans begin to float?

Columbia Management, Investment Team | July 11, 2013

…sk, highly leveraged transactions risk, derivatives risk, confidential information access risk, impairment of collateral risk, and prepayment and extension risk. Generally, when interest rates rise, the prices of fixed income securities fall, however, securities or loans with floating interest rates can be less sensitive to interest rate changes, but they may decline in value if their interest rates do not rise as much as interest rates in genera…

Compelling opportunity in municipal bonds

Catherine Stienstra, Senior Portfolio Manager | November 7, 2013

…reversed course, increasing 2.15%, as market fears faded, issuance slowed further and investors took advantage of opportunities to lock in especially attractive interest rates. Spreads widened in lower quality and high-yield securities, as Detroit, Puerto Rico and Illinois pension problems crowded the headlines. Headlines aside, these issues are not representative of the broad municipal market, and the number of municipal defaults is at its lowe…

New taxes require strategies to maximize after-tax return

Abram Claude, Vice President, Columbia Management Learning Center | March 18, 2014

…The tax tail should not wag the investment dog. But there are steps that investors can take to improve after-tax returns by mitigating the additional tax bite that began in 2013. Managing the differential in tax treatment of securities through asset location Investors with sizeable investments in taxable accounts, especially investors who are still working and are not currently living on their investments, should consider a strategy for shelteri…

The perils and pitfalls of buying individual municipal bonds

James Dearborn, Head of Municipal Bonds | February 27, 2014

…2-2013 YTD) Source: Goldman Sachs, December 27, 2013 Ratings — Stale and often volatile ratings leave individual investors at risk Individual investors typically rely on the rating agencies to determine the credit quality of securities they are considering for purchase. Unfortunately, these ratings, especially for secondary market purchases, are often stale. In addition, the ratings may be volatile due to agency rating recalibrations as well as…