A pain trade appears imminent for investment grade bonds, where the market delivers the maximum amount of pain to the most investors of an extremely popular asset class. At least according to credit spreads, which have historically indicated relative performance periods with high accuracy. Given the record high interest rate risk and low yield of investment grade bonds, it may be time to diversify core bond allocations with high yield credit.
A loan fund’s size and investment opportunities are negatively correlated. This makes capacity constraint a key factor, allowing for high conviction focus on quality opportunities.
Short duration bonds have a Trojan horse. Long maturity bonds often masquerade as short duration. With a minor price change, a short duration bond with a long maturity can become long duration, revealing far more risk than originally indicated.
Equity has a credit blind spot. 95% of Russell 3000 companies issue debt, 75% of which is sub-investment grade. Equity investors study stock price movements but often ignore credit market signals. However, when a company's credit deteriorates, its equity follows.
Smart yield still exists. Short duration BB-B corporate bonds are providing high yield, downside protection, and interest rate protection in an ultra-low yielding environment. Yet the bonds remain largely overlooked by the industry.
The information on this page is provided for the reader's information only. Please note the date of each article attached, as the information has not been updated for any information in such articles that might have changed. The reader should not rely on such information for any purpose. The information on this page does not constitute the provision of investment advice. In addition, it does not convey an offer of any type and is not intended to be, and should not be construed as, an offer to sell, or the solicitation of an offer to buy, any securities or other financial products. No assurances can be made that any aims, assumptions, expectations, strategies, and/or goals expressed or implied above were or will be realized or that the activities or any performance described did or will continue at all or in the same manner as at the time of the articles.