Perspectives Blog

Correlation’s essential role in diversification

Columbia Management, Investment Team | December 5, 2013

Diversification strategies can help mitigate overall portfolio volatility. An important component of diversification strategies is correlation, or the measure of how one security moves in relation to another. Portfolios with lower correlation among assets will experience less overall volatility, even if the underlying assets are equally volatile individually. Most investors have heard about the concept of diversification, the typical expressio…

Ghost of crises past

Jay Leopold, Head, U.S. Investment Risk | October 27, 2014

…treats than tricks in the future. Economic growth and the capital markets experienced an extended period of low volatility in recent years. As a result, a sense of complacency had been building among investors. Historically, these periods of low volatility can last a number of years as seen by the VIX Index (a measure of expected volatility in the equity markets) between 1993-1997 and 2003-2007 (Exhibit 1). This environment was shattered suddenl…

October — It always seems to happen in October!

Ted Truscott, CEO, Global Asset Management | October 20, 2014

…omic growth is now the problem, and the current downturn is a reaction to changes in growth expectations and the volatility of that growth. Market assumptions for steady growth did not necessarily account for all the other risks. The road ahead It is important in these times of market volatility (positive or negative) to keep a calm, long-term perspective. With market realization of risks inevitably comes overreaction and opportunity. Keeping one…

To infinity and beyond!

Colin Moore, Global Chief Investment Officer | October 13, 2014

…imit on an infinite policy and what lies beyond its expiration? Transition points are often the source of market volatility as the certainty of the previous focus is replaced by the uncertainty of the new focus. In addition to increased volatility, we may also experience a correction, loosely defined as a drop in major indices of at least 10%. While volatility and corrections are unpleasant, they can motivate investors to focus less on QE (an ext…

The importance of taking a long-term perspective

Jeffrey Knight, CFA, Global Head of Investment Solutions and Asset Allocation | February 3, 2014

…part of our investment process. These expectations can help us to make rational decisions in the face of market volatility. The research that underpins these forecasts, meanwhile, helps us to distinguish temporary trading volatility from more significant fundamental changes that could alter our longer term assessments. So far, market volatility in 2014 has not changed our outlook for the major drivers of our strategic forecasts, like economic gr…

Not all emerging markets are created equal

Robert McConnaughey, Director of Global Research | January 27, 2014

We see emerging markets shifting from an environment of common thematic tailwinds to one of more idiosyncratic outcomes We believe that painting all emerging markets with a broad brush is a mistake We examine some of the key factors in uncovering EM investment opportunities Emerging markets (EM) is a term given to a universe of countries that is extremely diverse across a wide number of variables including geography, levels of industrializatio…

Hungry for income? High yield munis could be your meal ticket

Chad Farrington, CFA, Head of Municipal Bond Credit Research and Senior Portfolio Manager | May 28, 2014

High yield muni bonds represent an attractive investment opportunity Professional money managers can help with the intricacies of the high yield muni space Current income and potential tax advantages in the high yield space Attractive yields, potential for price appreciation Many investors are concerned about the prospect of rising interest rates and the impact higher rates may have on bonds, especially since we’ve been in a very low rate envi…