Perspectives Blog

The case for active muni management

Kimberly Campbell, Senior Portfolio Manager | April 21, 2014

…, critical issuer selection and risk oversight to avoid credit minefields. On the security selection level, portfolio managers analyze each security’s characteristics — issuer, credit quality, sector, coupon, yield, maturity, duration, call features — in addition to current market fundamentals and technicals, to determine which securities are most likely to outperform, or underperform. Credit analysts provide their independent, fundamental bottom…

The Yellen Fed

Zach Pandl, Portfolio Manager and Strategist | October 9, 2013

President Obama to nominate Janet Yellen for Fed Chair. Yellen has strongly supported the Fed’s unconventional easing measures in recent years, and we expect that her nomination will therefore be interpreted as favorable to duration and carry trades. Yellen has described an “optimal control” framework, which could indicate a coming revision to the current structure of the FOMC’s forward guidance. According to press reports, Preside…

Rates rise, convertibles do what?

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

…ods, convertible securities had a negative return only when equities also lost money. Convertible returns were neutral or positive as long as stock returns were positive.* While it is difficult to measure, the option-adjusted duration of the convertible market is low, similar to that of a short-duration bond fund.** Re-allocating bond exposure to convertibles will tend to shift risk away from interest rates and toward equity risk factors like gro…

Thoughts on navigating market volatility in today’s technology markets

Rahul Narang, Senior Portfolio Manager | April 28, 2014

…many stocks down 40% over the past six weeks. Similarly, the Internet sector is down approximately 15% from the highs on March 7, 2014 with many stocks down more than 25%. The market seems to have less appetite for the longer duration TAM (total available market) and revenue multiple stories, with greater preference for current earnings power. We wanted to share some historical perspective on the hyper growth software (SaaS or Cloud) names as wel…

Gut check: The outlook on fixed income

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

…l over the next three years. Same question for municipal bonds? Maybe not first, but should win a medal. Municipal bonds suffered with most other high-quality fixed-income sectors in 2013. The asset class tends to have longer durations so rising rates can be challenging. Munis also suffered from negative headlines (such as Detroit, Puerto Rico) and persistent outflows. But the underperformance of the sector appeared excessive to us. Any fixed inc…

Credit alternatives in government-backed debt

Columbia Management, Investment Team | June 23, 2014

…15bn market and can offer spreads of 50–60 bps for an average life of 5–7 years. High-quality industrial corporates, which lack the government guarantee, are currently offering similar spreads for securities with a comparable duration. With credit spreads approaching pre-crisis tight levels, the risk-reward for credit risk has become less compelling. The Columbia Management Core Team has taken advantage of this relationship by swapping from 5-yea…

Slack and inflation

Zach Pandl, Portfolio Manager and Strategist | July 21, 2014

…capacity means one of two outcomes is likely: (1) earlier-than-expected rate hikes or (2) higher-than-expected inflation. The distinction matters for the shape of the yield curve, but both outcomes are unfriendly for Treasury duration. Separately, limited spare capacity means that inflation risks have become more balanced. We are not concerned about the size of the Fed’s balance sheet and its ability to tighten policy when the time comes. Rather,…