Perspectives Blog

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

…negative effects of a rising rate environment, it will also result in the predicament of nearly eliminating the income from the fixed income portion of a portfolio. Many investors may regret having spent the last several years sitting in cash or money market funds while waiting for interest rates to rise. These investors may want to consider a short-maturity municipal bond fund as an alternative. Note that short muni funds have a floating net as…

Maximizing workplace retirement plans to reduce or eliminate the net investment income tax

Abram Claude, Vice President, Columbia Management Learning Center | November 6, 2014

…-income investors with taxable investments encountered a new tax that began 2013: the 3.8% tax on net investment income (NII). The NIIT applies to the lesser of the amount of: (a) Modified adjusted gross income (MAGI) that exceeds an income threshold based on tax filing status or (b) NII. (Related reading: What is the Net Investment Income Tax, and how is it calculated?) However, investors may be surprised to learn there are ways to “rearrange” o…

Flexible income strategies — Avoiding side effects from the Fed’s medicine

David King, CFA, Senior Portfolio Manager | August 11, 2014

…ld are trying to devise new securities that will raise money for worthwhile business projects while providing an income stream to yield-starved financial investors. This is good news, but how can an individual investor participate in this problem-solving innovativeness? In managing strategies with a flexible income objective, we notice the Fed’s strong influence throughout the government and corporate bond markets, and the associated difficulty i…

Half-time report on the U.S. consumer

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | July 28, 2014

…credit cards less and using debit cards much more, the supports for higher discretionary spending are keyed off income and wages and also employment. With low debt use and income growth holding back consumption and demand, households will require stronger job growth and real wage gains to accelerate their spending. Households have made enormous progress in the past few years with the ongoing repair of balance sheets, grudging yet steady job gai…

Fixed income strategies – The pros and cons of generating returns with negative duration

Columbia Management, Investment Team | July 14, 2014

…ity to invest tactically across sectors and manage interest rate sensitivity. While it may be useful for a fixed income manager to employ a negative duration strategy, getting the timing right can be very challenging. With interest rates defying expectations so far in 2014, investors need to ask what should be at the core of their fixed income portfolio. By Kris Moreton, CFA and Patrick McConnell, Fixed Income Product Management In 2011, a new c…

Don’t throw the baby out with the bath water – The case for long muni bond funds

Catherine Stienstra, Senior Portfolio Manager | January 29, 2014

…Two of the most compelling arguments in support of long bonds are: 1) the current appealing level of tax-exempt income and 2) the total return opportunity they represent for long-term investors. Come April 15, millions of Americans will be staring at much higher tax bills and we suspect that many taxpayers may be caught off guard by the new higher levels of taxation. The highest federal income tax rate is 43.4%, resulting in many investors takin…

Gut check: The outlook on fixed income

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

…e two sectors will perform as well as they did in 2013, but we think they will fare better than most other fixed income choices in 2014. Will emerging market bonds finish first or last? First. In 2012, emerging market (EM) bonds generated the highest total return in fixed income (18%). Last year, EM bond returns ranked near the bottom, losing more than 4%. Recent poor performance can be explained as payback (reversal of strong inflows when the se…