US interest rates are likely to head up gradually over the next several years, now that the long tailwind from a three-decade-long rate decline has subsided. With bonds still an important part of many portfolios, what should investors be thinking about?
Bond investors are used to managing interest-rate risk and credit risk. But the financial crisis should have taught us that there are times when liquidity risk can be just as important to manage. Now is one of those times.
Capital markets could get a jolt if the US Federal Reserve raises interest rates faster and farther than expected. But we don’t think there would be a major sell-off in risk assets, and there are several ways for investors to play the possibilities.
Though they’ve defied expectations this year, higher interest rates appear to be all but inevitable. Investors need to take measure of the rate sensitivity in their portfolios—and stay agile—to negotiate the rough market crosscurrents a rate reversal may bring.
The pace of innovation is accelerating and equity investors are increasingly at risk of getting left behind. We think that moving away from the benchmark can help portfolios keep up with rapid change across many industries. (more…)
Some investors have such little faith in the merits of active management that they prefer to take a 100% passive approach. We think they may be making more active decisions than they realize. (more…)
We think investors who build laddered portfolios to protect against rising rates will be disappointed—by locking in low yields with traditional ladders or by hidden risks of higher-yielding ladders. In our view, actively managed portfolios are better able to take advantage of changing markets.
It’s often hard to resist the temptation of an inexpensive, passive equity allocation. But we think you can find plenty of good reasons to go active just by looking around the markets today. (more…)
Longer-dated oil futures contracts have been on the rise so far in 2014, and we think there’s a good case to be made that they’ve got further to go. The potential for an upside oil-price surprise may point to investment opportunity.
This year’s leveraged buyouts (LBOs) are being financed with more debt and include fewer protections for creditors. Regulators, the press and market participants are watching this closely, and so are we. But we don’t think it’s worth losing sleep over—at least not yet.