Perspectives Blog

Duration for diversification

Columbia Management, Investment Team | November 19, 2013

…on of returns — instead of a midpoint of 7.2%, the midpoint falls to zero (Exhibit 1). But the critical point to remember is that, in this example, only the midpoint is changing. Other aspects of Treasury returns — like their volatility and, most importantly, their correlations with other asset returns — need not change just because rates are rising. This means that Treasuries can still have diversification value — they can enhance portfolios’ ri…

The importance of taking a long-term perspective

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

…nkly, our expectations for bonds in 2014 are even more meager than our already subdued five-year forecasts. The fact that bonds performed well in January, then, could present an opportunity to reduce duration when the current volatility storm subsides. The other asset category to consider is emerging markets (EM). Here, we make the simple observation that investor flows turned negative during 2013, and provide an ongoing tactical headwind as 2014…

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

…est in bonds is for their income, and the income currently available from high yield municipals equals or exceeds income from taxable bonds without even considering the tax advantaged status of municipals. Despite significant volatility in the municipal market resulting from the financial crisis in 2008, fears of tax reform and dwindling market liquidity due to dealer contraction, high yield municipal yields have averaged more than 6% over the pa…

Puerto Rico’s turbulent ride

Michael Taylor, Senior Municipal Analyst | September 26, 2013

…cal operations, liquidity, and maintaining investment-grade agency credit ratings. We maintain the opinion that investing in Puerto Rico municipal bonds remains appropriate only for investors who can tolerate rating and price volatility. Since publishing our June 2013 commentary on Puerto Rico’s weakening financial health, the market for the Commonwealth’s municipal bonds has been nothing but turbulent. Over the past several weeks, particularly…

Not all emerging markets are created equal

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

…year on the reform front – execution of the Chinese reforms are obviously on the market’s mind, but presidential elections in India, Brazil, South Africa, Indonesia, Turkey and possibly Thailand have the potential to increase volatility, but also open a window for reforms to gain momentum if the ruling party wins with a strong mandate. On the point of reforms, abundance and hope of continued growth seem to have bred complacency in many countries….

Q2 fixed income outlook – Hitting for the cycle

Gene Tannuzzo, CFA, Senior Portfolio Manager | March 31, 2014

We have started to reduce exposure to high-quality bonds with limited upside potential and high-yield bonds in which credit risk appears too aggressive. Following weakness last year, emerging market debt has posted gains this year, and we expect further strength ahead as volatility subsides. While we expect a flatter yield curve over the next few months as investors focus on the timing and pace of rate increases, we don’t think they should avoi…

Global Asset Allocation Outlook (as of February 24, 2014)

Columbia Management Global Asset Allocation Team, | March 10, 2014

…hile earnings have not kept up. This month, we moderated our overweight in European equities from overweight to neutral. In the past few weeks emerging economies — particularly those in Eastern Europe — experienced heightened volatility. For the moment, the situation is relatively calm but risks remain that volatility could re-emerge. We maintain a neutral outlook on overall emerging markets equities, but have lowered our overweight to EMEA regio…