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.
Pension fund managers, like many investors, have historically paid a premium for liquidity. Lately they’ve started to realize that liquidity can be an illusion—but it can also be an opportunity.
By Fernando Losada (pictured) and Alexander Perjessy of AllianceBernstein (NYSE:AB)
Fixed-income investors often divide emerging markets into commodity exporters and commodity importers. We think this overlooks an important reality: commodity wealth is not the sole—or even the most important—driver of EM performance. (more…)
By Hayden Briscoe (pictured) and Hua Cheng of AllianceBernstein (NYSE:AB)
Despite worries about a collapse in China’s property market, we think the financial system will navigate the coming credit cycle if banks can buy time to resolve loan problems—and receive government support if needed. (more…)
By Jeff Skoglund (pictured) and Shrut Vakil of AllianceBernstein (NYSE: AB)
US banks have come a long way since the financial crisis, and that’s good news for fixed-income investors. We think better fundamentals and stricter regulations are creating a good formula for banks’ preferred securities.
To protect their portfolios from rising interest rates and volatility, many high-yield investors have headed for short-duration strategies. We think some of the more popular approaches may expose investors to bigger hazards than they realize.
High-yield bonds’ attractive income has made them popular in today’s low-rate environment. But market complacency has caused callable-bond investors to ignore a lurking risk: duration extension in a rising-rate scenario.
Bond investors have historically enhanced their returns by taking on more interest-rate or credit risk. Today, a third opportunity is emerging for investors: the liquidity premium. (more…)
By Doug Peebles (pictured) and Ivan Rudolph-Shabinsky of AllianceBernstein (NYSE:AB)
The US Fed has said it will almost certainly boost short-term interest rates by 2015, and many bond investors are focused intently on managing the risks of rising rates. But it’s also important to recognize that there are benefits. (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.