Perspectives Blog

Credit alternatives in government-backed debt

Columbia Management, Investment Team | June 23, 2014

…dit of the U.S. government and, thus, has minimal credit risk. The risk to the investor is of prepayment, as the loans have a prepayment option by the borrower. However, investors are paid a declining premium during the first half of the loan term, partially mitigating this risk. Loans are pooled into debentures and issued to the public market on a monthly basis. CDC/504 debentures offer an attractive alternative to non-agency CMBS. They make up…

Gut check: The outlook on fixed income

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

…on-like returns, which is better than last year but nothing to brag about. Do we prefer high-yield bonds or bank loans? High-yield bonds. High-yield bonds and bank loans were the only two winning sectors in fixed income in 2013 with returns of 7% and 5%, respectively. We are comfortable holding our current positions in high yield and bank loans, but not adding. Corporate fundamentals remain strong, which is supportive of both asset classes. Some…

Could a 529 plan help you pay less for college?

Columbia Management, Investment Team | May 22, 2014

…naging the cost of higher education. Saving in advance could offer a significant cost savings compared to taking loans during college. Use our 529 Savings vs. Loans Calculator to run your own personalized estimate. Saving for college early on can greatly benefit you in the long run. By saving in an investment vehicle such as a 529 college savings plan, you may be able to avoid relying on loans or taking from your cash flow in the future to make…

Is there opportunity in small-cap banks?

Jeremy Javidi, Senior Portfolio Manager | November 3, 2014

…013, the banking industry once again began to outperform. We continue to see growth in commercial and industrial loans as a positive indication for the economy. These loans also provide the growth of assets for the banks. Given their improving profitability, discounted valuation and strong growth, we believe that small-cap banks are an increasingly attractive investment opportunity. How does one go about assessing investment opportunity in the s…

Missing links and multipliers

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | June 9, 2014

…student debt. This was underscored recently by a New York Fed study* which showed that young people with student loans were much less likely to invest in houses than those without loans, which is a reversal of pre-recession trends. They believe this is one reason why the housing recovery has not been stronger. When you restrict credit in the midst of a 100 basis point rise in interest rates and a 13% jump in home prices, affordability is invariab…

Is Europe heading for Japanese-style deflation?

Martin Harvey, Fund Manager, Threadneedle International Ltd | August 4, 2014

Although there are many differences that should ensure that the eurozone does not follow Japan‘s fate, policymakers will need to act forcefully if the risk of deflation intensifies. While the euro area appears to be on track to avert deflation in the short term, many euro countries are “one crisis away from deflation.” The European Central Bank (ECB) claims to be ahead of the game, but policy needs to be more pro-active. The following is an ex…

Does a perfect policy portfolio exist?

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

Risk Parity represents a significant advance in asset allocation, but we don’t believe that there is a single perfect policy portfolio. While Risk Parity works well in neutral markets, we don’t think it is the best policy under bearish, bullish or highly bullish market conditions. We believe that a policy function that rotates among four distinct policy portfolios is closer to perfect than any single policy portfolio. The idea of a policy port…