Perspectives Blog

Take an active approach to selecting your active manager

Robert McConnaughey, Director of Global Research | April 7, 2014

Be sure the manager takes enough risk Be sure the manager takes intentional, well-informed risk Be sure the manager has delivered returns for that risk taken across multiple backdrops For some time, we have written about the challenges active equity managers face from a market with unusually high cross-correlations. We have also stated our belief that the correlation pendulum would swing back to more normal levels (at least) as the aftershocks…

The secret to managing pension plan risk

Frank Salem, Senior Portfolio Manager | February 10, 2014

…ts are not aligned with the liability the funded status will be highly volatile. While equity holdings and other risk assets are useful for underfunded plans to improve their funded status, they have little or no correlation to the liability discount rate and are an added source of risk to the plan’s funded status. The widespread improvement in funded status makes now an opportune time for pension plans to reduce risk. Over the past 10 years, a g…

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

…asis points, short fund managers have the opportunity to increase income without materially adding interest rate risk. While the duration risk may be greater when compared to a money market fund, we believe that the overall benefits — higher yield and investment flexibility — of a short muni fund may provide investors with an attractive investment option, especially when considering the opportunity cost of holding cash or investing in a money mar…

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

…, we can’t completely rule out a future default or debt restructuring of some sort. Q: Is Puerto Rico a systemic risk for the market? A: We think Puerto Rico is a potential systemic market risk. PR is one of the largest issuers in the municipal market with more than $70 billion in outstanding debt across its issuing bodies (not including unfunded pension liabilities) and is widely held. By comparison, Detroit has less than $8 billion in outstandi…

The case for active bond management

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

…an active manager’s objective is to outperform the benchmark. They are able to do this by managing interest rate risk, identifying attractive sectors and utilizing fundamental research to drive security selection. Active management also allows the flexibility to capitalize when interest rates or credit spreads reach unsustainable levels. Portfolio liquidity can also be increased when necessary to limit overall risk exposure. Passive managers, on…

The case for active muni management

Kimberly Campbell, Senior Portfolio Manager | April 21, 2014

…ongly that active municipal bond management, with its ongoing investment oversight, credit research, trading and risk management process, can provide investors with significant advantages, especially in a tax and economic environment as uncertain as we have today. Disclosure There are risks associated with an investment in a municipal bond fund, including credit risk, interest rate risk, prepayment and extension risk, and geographic concentration…

The perils and pitfalls of buying individual municipal bonds

James Dearborn, Head of Municipal Bonds | February 27, 2014

…looking to previously issued bonds available in the secondary market. However, here too retail investors are at risk as more frequent public rating downgrades cause prices to decline. Exhibit 1: Tax-exempt bond issuance, redemption and net supply (2012-2013 YTD) Source: Goldman Sachs, December 27, 2013 Ratings — Stale and often volatile ratings leave individual investors at risk Individual investors typically rely on the rating agencies to dete…