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…

Navigating rising rates

Columbia Management, Investment Team | June 11, 2013

Interest rates will rise at some point; investors must consider how to manage interest rate exposure in their portfolios. Duration can be a highly misleading measure of interest rate risk when making comparisons across products. For fixed income investors, sector exposure matters, and fundamental research can help avoid potholes. By Zach Pandl, Senior Interest Rate Strategist, and Gene Tannuzzo, Senior Portfolio Manager It’s time for investors…

Gaps, not growth

Zach Pandl, Portfolio Manager and Strategist | February 25, 2014

Monetary policy is primarily about “gaps” not growth: the Fed is trying to reduce spare capacity in the economy, not bring about a rapid expansion per se. Despite concerns over cyclical weakness in labor force participation, the unemployment rate is sending similar signals as most other output gap proxies. The output gap improved despite a relatively slow expansion, suggesting weak potential growth. While it’s far too soon to revise any medium…

Gut check: The outlook on fixed income

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

The next big move in rates may be triggered by concerns about possible future Fed rate hikes. High-quality bonds may struggle to generate coupon-like returns. Emerging markets may ultimately benefit from the synchronized uptick in growth in global developed markets. With nearly two months of the year behind us, we thought now would be a good time to see how the fixed-income market is faring in 2014 and assess our outlook. We asked our investme…

Should your income be fixed?

David King, CFA, Senior Portfolio Manager | December 16, 2013

Investors need to rethink the role of fixed income in building portfolios How to provide an adequate rate of return with an acceptable level of risk Benefits of a non-fixed, income-oriented strategy in today’s environment Peanut butter and jelly. Bacon and eggs. Scotch and soda. In the investment industry, the words “fixed” and “income” seem as inseparable as our favorite food and beverage combinations. Something which has served millions of p…

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…

A primer on preferred securities

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

…capital structure, and are always ahead of common equity and traditional preferred securities. The newest generation of hybrid structure typically start out as fixed-rate bonds for a set period and then transition to floating rate payments following a call date. • Traditional preferred securities are perpetual securities that rank ahead of common shares and behind all other debt. These securities are typically held by retail investors and usually…