Perspectives Blog

Trouble in paradise: Q&A about Puerto Rico bonds

Chad Farrington, CFA, Head of Municipal Bond Credit Research and Senior Portfolio Manager | January 2, 2014

…o’s financial problems have been simmering for decades. The Commonwealth has an ailing economy, recurring budget deficits and severely underfunded pension systems. Unlike most other municipalities, PR issues debt to pay annual operating expenses. The chart on the following page provides a snapshot of Puerto Rico’s unrestricted net asset deficit — accrued over years and running annual operating deficits — and the percent of funding for the governm…

The case for active bond management

Carl Pappo, Head of Core Fixed Income | August 25, 2014

There have been instances where the passive approach to bond investing produced significant underperformance relative to a benchmark. Index funds are at a significant disadvantage to active portfolios in which managers incorporate valuation into their decision making process. The many nuances and inefficiencies of the fixed income market create both difficulties for indexing and opportunities for active management. Co-authored by Michael W. Za…

Emerging market equities — Still a world of opportunity

Georgina Hellyer, Fund Manager | December 1, 2014

Despite a disappointing last five years, the structural growth drivers that have long made emerging markets an attractive area in which to invest are as compelling as ever. While emerging markets may be a single asset class, they are anything but homogenous. This provides opportunity for active investors to seek out higher returns. There are an increasing number of world-class companies to choose from, with capable management, healthy balance s…

What’s the outlook for muni bonds?

James Dearborn, Head of Municipal Bonds | June 19, 2014

Strong YTD performance resulted from falling rates, a dearth of new supply and a resurgent demand by investors seeking attractive taxable-equivalent yields. We believe municipal bonds should continue to perform well in the second half of 2014. Yields on muni bonds are compelling when considering the impact of taxes on non-exempt securities. As we reach the halfway point of 2014, it’s a good opportunity to review our full-year outlook for the m…

Asia’s emerging markets – Room to run

Dara White, Senior Portfolio Manager | November 10, 2014

…f the U.S. eventually raising interest rates. But India has made significant improvements in its current-account deficits, helped by shrinking its trade deficit by $8 billion since last May. That makes them less vulnerable. We would see any significant volatility around rates rising as a buying opportunity. Southeast Asia The cost of doing business in China has been rising, a function of their appreciating currency and aging population. The Chine…

Rebalancing the U.S. economy

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | January 13, 2014

…eholds and from spending cuts by federal and state governments. While painful, these cuts have rebalanced budget deficits. A year ago, the U.S. budget deficit was 6.5% of gross domestic product (GDP). It will likely fall to less than 4% of GDP in last year’s fourth quarter and looks to decline to something near 3% this year. Receipts are up 13% and outlays are down 5.5% in the last year—this is admirable progress. The easing fiscal drag will add…

Flexible income strategies — Avoiding side effects from the Fed’s medicine

David King, CFA, Senior Portfolio Manager | August 11, 2014

In today’s low interest rate environment, investors with cash on hand and a limited appetite for risk aren’t having an easy time growing their wealth. The Fed’s strong influence throughout the government and corporate bond markets makes it hard to find attractive fixed-income instruments of low or moderate risk. To increase an investor’s chances of success, an investment strategy needs the flexibility to look beyond the most visible asset class…