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…

Credit alternatives in government-backed debt

Columbia Management, Investment Team | June 23, 2014

…ernment agency debt, which fills a niche in the market between high-quality spread product and low-risk Treasury securities. Through explicit or implicit guarantees, timely principal and/or interest on agency debt ultimately may be backed by the U.S. government. Many investors associate U.S. agency debt with very low yields; indeed, the U.S. agency sector in the Barclays Aggregate Index — made up largely of Fannie Mae, Freddie Mac and Federal Hom…

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

…Municipal Bond indexes produced an occasional loss. 3. Yield advantage through security selection in lower-rated securities. Money market funds are restricted to owning bonds within the highest credit quality categories, with the bulk of assets limited to top tier-rated securities. As a result of the Fed’s Zero Interest Rate Policy (ZIRP), very short, high quality securities have produced virtually no return over the last several years. Conversel…

Duration for diversification

Columbia Management, Investment Team | November 19, 2013

Many investors struggle to determine the appropriate amount of bond duration in an environment of rising interest rates. The right amount of duration has to be considered in a portfolio context, because the main value of duration exposure comes through diversification. Because of the negative correlation between duration and the returns of riskier assets, high-quality fixed income will still be a cornerstone of any disciplined portfolio. By Za…

A less certain world favors high-quality stocks

Philip Dicken, Head of European Equities, Threadneedle International Ltd | October 6, 2014

Current sentiment indicators do not suggest that Europe is heading back towards recession, though GDP growth will remain subdued. If Q3 sees a rebound, full QE may be unlikely this year, but any further weakness will increase the pressure on the ECB to act. In a less certain growth environment, we believe stocks that are able to deliver earnings growth will command a justifiable premium. Recap: excessive optimism at the start of 2014 As 2014 b…

Compelling opportunity in municipal bonds

Catherine Stienstra, Senior Portfolio Manager | November 7, 2013

…returns of some municipal bond investments (depending on the state of residence). Income from certain tax-exempt securities may be subject to the federal and/or state alternative minimum tax for some investors. In addition, federal and state income tax rules will apply to any capital gain distributions and capital gains or losses on sales. When investing in municipal securities, investors in higher tax brackets can receive a greater tax benefit t…

What’s the outlook for muni bonds?

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

…y remains compelling Yields on municipal bonds are compelling when considering the impact of taxes on non-exempt securities. Exhibit 1 provides the stated and taxable-equivalent yields of various fixed-income classes. Comparing the stated yields of tax-exempt and taxable securities is an apples-to-oranges comparison, so investors should look at their taxable-equivalent yields, which are adjusted for the impact of taxes. A taxable-equivalent yield…