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Understanding Alternative Investments Understanding Alternative Investments Alternative investments offer opportunities to diversify portfolios in times of market uncertainty. But among a range of options, investors must first understand the risks and benefits.
Across the Spectrum: Understanding Public and Private Credit Across the Spectrum: Understanding Public and Private Credit Credit provides a rich opportunity set for investors.
How Can Alternatives Help During Periods of Market Volatility? How Can Alternatives Help During Periods of Market Volatility? During periods of market uncertainty, many investors need options – and opportunities.
Sustainable Investing: Understanding ESG in Bonds Sustainable Investing: Understanding ESG in Bonds As investors, we believe ESG fixed income – or bonds – could soon rise to a place of leadership in sustainable investing.
Master Limited Partnerships (MLPs) Master Limited Partnerships (MLPs) Master Limited Partnerships (MLPs) are tax-advantaged and yield-oriented publicly traded U.S. infrastructure assets that operate primarily in the oil and gas midstream industry.
Understanding Tail Risk Understanding Tail Risk Learn about “tail risk” and how portfolios can be managed to minimize losses without curtailing growth.
Understanding Preferred Securities Understanding Preferred Securities Traditional preferred securities (“preferreds”) are fixed-income investments with equity-like features mainly issued by large banks and insurance companies.
Understanding Hedged Share Classes Understanding Hedged Share Classes Hedged share classes can be a useful tool for mutual fund investors to gain exposure to assets denominated in foreign currencies, without taking on the full accompanying currency risk.
Understanding Green, Social and Sustainability Bonds Understanding Green, Social and Sustainability Bonds Offering a wide range of potential opportunities for active investors, sustainable bonds are an increasingly important part of global fixed income markets.
Understanding Alternatives’ Speak Understanding Alternatives’ Speak A glossary of terms to help guide investors through the key terms used in the private alternatives space.
Risk Factor Diversification Risk Factor Diversification Traditional portfolio construction approaches, which focus on asset class diversification, may fall short of investors’ goals. A more efficient diversification strategy may be to allocate across the underlying “risk factors.”
Multi-Factor Strategies Multi-Factor Strategies As investors seek to build diversified equity allocations with the objective of higher returns, they may consider multi-factor smart beta strategies, which offer the potential for attractive performance and increased diversification with lower fees than traditional active equity solutions.
Managed Futures Strategies: Inside the “Black Box” Managed Futures Strategies: Inside the “Black Box” Momentum, trend-following, managed futures - are terms that can seem intimidating and opaque for many investors. But, while these types of investment strategies may be less familiar than traditional strategies, they can be quite intuitive and offer attractive diversification and return potential that is worth getting to know.
Interest Rate Swaps Interest Rate Swaps Interest rate swaps have become an integral part of the fixed income market. These derivative contracts, which typically exchange – or swap – fixed-rate interest payments for floating-rate interest payments, are an essential tool for investors who use them in an effort to hedge, speculate, and manage risk.
Inflation-Linked Bonds (ILBs) Inflation-Linked Bonds (ILBs) Inflation-linked bonds, or ILBs, are securities designed to help protect investors from inflation. Primarily issued by sovereign governments, such as the U.S. and the UK, ILBs are indexed to inflation so that the principal and interest payments rise and fall with the rate of inflation. Inflation can significantly erode investors’ purchasing power, and ILBs can potentially provide protection from inflation’s effects. ILBs may also offer additional benefits in a broader portfolio context.
Inflation Inflation Inflation affects all aspects of the economy, from consumer spending, business investment and employment rates to government programs, tax policies, and interest rates. Understanding inflation is crucial to investing because inflation can reduce the value of investment returns.
High Yield Bonds High Yield Bonds High yield bonds – defined as corporate bonds rated below BBB− or Baa3 by established credit rating agencies – can play an important role in many portfolios. They typically offer higher coupons than government bonds or high grade corporate bonds (or, corporates) and have the potential for price appreciation in the event of an improvement in the economy, or performance of the issuing company (of course, if these conditions worsen, then prices can also go down). Because the high yield sector generally has a low correlation to other sectors of the fixed income market along with less sensitivity to interest rate risk, an allocation to high yield bonds may provide portfolio diversification benefits. In addition, high yield bond investments have historically offered similar returns to equity markets, but with lower volatility.
Hedging for Different Market Scenarios Hedging for Different Market Scenarios A look at specific strategies, and their trade-offs, for diversifying equity risk.
Duration Duration Most bond investors know that interest rate changes can affect the value of their fixed income holdings. How a bond or bond portfolio’s value is likely to be impacted by rising or falling rates is best measured by duration.
Currencies Currencies The currency market is the largest and most liquid financial market in the world. Currencies like the U.S. dollar, the British pound and the euro trade in the foreign exchange (FX) market 24 hours a day, fluctuating in value relative to each other almost constantly – and there are several paths to potential profits in the FX market.
Credit Default Swaps Credit Default Swaps Originally formed to provide banks with the means to transfer credit exposure, CDS has grown as an active portfolio management tool. The performance of CDS, like that of corporate bonds, is closely related to changes in credit spreads. This makes them an effective tool for hedging risk, and efficiently taking credit exposure.
Corporate Bonds Corporate Bonds After government bonds, the corporate bond market is the largest section of the global bond universe. With a vast array of maturities, yields and credit quality available, investing in corporate bonds has the potential to provide higher yields than government bonds and diversification benefits for investors.
Commodities Commodities Commodities are a distinct asset class with returns that are largely independent of stock and bond returns. Therefore, adding broad commodity exposure can help diversify a portfolio of stocks and bonds, potentially lowering the risk of an overall portfolio and boosting returns. Given their impact on consumer goods prices, commodities can also offer a hedge against inflation.