Perspectives Blog

Holding multiple investments does not ensure better diversification

Columbia Management, Investment Team | April 23, 2014

…tially enhancing diversification. By Todd White, Head of Alternative Investments and Kent Peterson, Ph.D., Senior Portfolio Manager Most investors are familiar with diversification — reducing one’s risk profile (i.e., annual volatility) without affecting return by adding different asset classes or investments to your portfolio. While this is true, the degree of risk reduction benefit depends directly upon the correlation of the portfolio’s asset…

The case for active muni management

Kimberly Campbell, Senior Portfolio Manager | April 21, 2014

…rned assets is never easy, municipal bond funds offer several compelling advantages in these challenging times. Many investors are turning to muni bond funds for the opportunity to earn an attractive tax-free yield with lower volatility than equities. In addition, munis have historically provided long periods of positive performance, as shown in the Barclays Municipal Bond Index chart below. Exhibit 1: Barclays Municipal Bond Index calendar-year…

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…

Second quarter asset allocation positioning

Columbia Management, Investment Team | May 14, 2013

…attractive relative value. However, high-quality fixed-income sectors tend to outperform in economic downturns, and we believe they should account for a portion of assets in a well-diversified portfolio. With a potential for volatility spikes, low correlation absolute return strategies should continue to be a part of diversified portfolios. In addition, select commodities and hybrid strategies with low correlation to equities can also add divers…

Should investors care about valuation?

Rich Rosen, Portfolio Manager | November 25, 2013

…n, the market doesn’t like inflation (because the quality of earnings stink), and hates deflation (earnings growth is harder to come by) and uncertainty (the hardest variable to get a grasp on). To us, the four year valuation volatility had more to do with rising and falling inflation/deflation fears, rather than stocks being overvalued or undervalued. Our conclusion: We would counsel investors who invest in stocks that doing so is a long-term pr…

Monetary policy shift creates new investment challenges

Columbia Management, Investment Team | August 6, 2013

…you must reconsider the dynamics of portfolio diversification in an era where policy tightening might be expected to generate simultaneous losses across many asset classes. Our favored areas for taking investment risk Recent volatility might have soured investors’ taste for investment risk-taking, but we believe that numerous opportunities for positive expected returns remain for the balance of 2013. In fact, the repricing of many assets as the…

Opportunity in lower-quality municipals

Columbia Management, Investment Team | August 15, 2013

Recently enacted higher tax rates — and the threat of even higher rates — enhance the attractiveness of tax-exempt income, especially versus other income-producing securities. Lower quality, shorter maturity investment-grade municipal bonds may provide similar yields as longer maturity bonds, but with lower interest-rate risk and volatility. Independent and well-resourced credit research is a critical tool in lower-quality municipal bond invest…