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…

Interpreting the bond rally from a multi-asset perspective

Jeffrey Knight, CFA, Global Head of Investment Solutions and Asset Allocation | June 2, 2014

…riables during both phases. The contrast is striking. During the early year rally, patterns seemed compatible with fear of an economic slowdown. In addition to falling bond yields, we saw falling stock prices, elevated equity volatility and a distinct decline in economic data surprises. During the more recent rally phase, we have seen precisely the opposite conditions. In fact, with bond yields having broken through to new lows (as of May 28), we…

Special report – 2014 mid-year review and outlook

Columbia Management, Investment Team | June 16, 2014

…econd half of the year may generate “coupon less” returns. Equities Robert McConnaughey, Global research director Review: Year to date through May, the U.S. major market indices are up low-to-mid single digits. Overall market volatility has been very low by historic standards and has trended down through the year. Beyond the high level averages, 2014 has seen some violent moves at a factor and industry level. After a strong start to the year, sma…

The perils and pitfalls of buying individual municipal bonds

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

Volatile ratings leave retail investors at risk Retail investors could pay higher prices Deck is stacked against retail investors With an increasing focus on the benefits of owning municipal bonds — attractive after-tax yields, low historical default rates and relatively low volatility — investors are again considering purchasing individual muni bonds. But the deck may be stacked against the retail investor. The allure of owning individual bon…

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…

The beginnings of a new moderation in Asia

Soo Nam Ng, Head of Asian Equities | June 2, 2014

The Great Moderation was a period of macroeconomic growth and reduced volatility that provided a backdrop to the strong performance of U.S. equities. The lessons hold relevance for equity investors in Asia as big picture conditions for a Great Moderation are starting to fall into place. We believe the “new moderation” mindset will take Asia into its next leg of development, unleashing its potential in a more sustainable and stable manner. Less…

Does a perfect policy portfolio exist?

Jeffrey Knight, CFA, Global Head of Investment Solutions and Asset Allocation | May 5, 2014

…sets in bonds might seem balanced, but in risk allocation terms it is anything but balanced. In fact, roughly 90% of the ups and downs of such a portfolio can be traced to the stocks, with bonds contributing a mere 10% of the volatility. Just by measuring the risk contributions, we can gain awareness of concentrations like this that asset weightings alone would never reveal. So enlightened, we can diminish unwanted risk concentrations and improve…