Fixed Income: The Hidden Risk of Indexing

Save this PDF as:
 WORD  PNG  TXT  JPG

Size: px
Start display at page:

Download "Fixed Income: The Hidden Risk of Indexing"

Transcription

1 MANNING & NAPIER ADVISORS, INC. Fixed Income: The Hidden Risk of Indexing Unless otherwise noted, all figures are based in USD.

2 Fixed income markets in the U.S. are vast. At roughly twice the size of domestic equity markets, investment options within the fixed income realm provide investors with a wide variety of income generating and capital preservation opportunities. While fixed income investments are generally considered more conservative than equities, they do contain certain risks that need to be understood and evaluated. Capital risk is perhaps the most obvious example. When a corporate issuer declares bankruptcy, bond investors are senior to equity holders and are therefore among the first investors to be repaid as assets are liquidated. Bond holders may still lose money in such cases, but often times much less than equity holders who stand to lose everything. Though fixed income investors may have some protection against capital risk, reinvestment risk and inflation risk are also important factors to consider when analyzing fixed income investments. Because fixed income investments have defined maturity schedules and because prices and yields are influenced by interest rates, understanding reinvestment risk is imperative to making sound fixed income investment decisions. Similarly, the risk that fixed income investment returns do not keep pace with rising prices means that monitoring the inflationary environment is vital. All three of these distinct risks are influenced by prevailing market and economic conditions. Economic conditions do not follow a perfectly circular path from expansion to recession and back again. Instead, they ebb and flow as expectations shift and sentiment changes. As these adjustments occur, different sectors of the fixed income market become more attractive than others. For example, when interest rates, GDP, and inflation are at certain levels, corporate bonds might present an attractive option. In a different environment, U.S. Treasury securities may be the best choice. In this regard, it is important for a fixed income investment manager to have the flexibility to analyze risks and choose which areas of the market are presenting the best opportunities. This ability to adjust to evolving conditions and pursue opportunities where they arise is generally referred to as active management. While active management has many benefits, passive management or indexing has been gaining in popularity in recent years. In a passive approach, fixed income sector selection is based on the current composition and issuance of a particular index. That means exposure to different parts of the fixed income markets is based on what an index holds, not on what areas may have the most favorable fundamentals. Manning & Napier Advisors, Inc. ( Manning & Napier ) believes this passive approach has many limitations, particularly in regards to security selection, sector allocation, and risk management. As such, we remain committed to our active and flexible investment approach, which allows us to take what the market gives and capitalize on opportunities as they unfold.

3 Fixed Income Indexing Broad fixed income benchmarks such as the Barclays Capital U.S. Aggregate Bond Index 1 ( BCA ) appear to provide investors with easy access to a diversified portfolio of high quality fixed income investments, while also offering returns that have historically been competitive with those of active fixed income investment strategies. However, indexing within the fixed income asset class may expose investors to potential hidden risks, particularly in today s market environment. In what follows, we discuss the implications of the BCA s increasing allocation to U.S. Treasury securities, today s historically low yield levels, the potential impact of rising interest rates on Treasury prices, and the general sensitivity of Treasury securities to changes in interest rates. Changes in the U.S. Treasury Allocation of Fixed Income Benchmarks BCA, which measures performance of the broad investmentgrade fixed income market, provides exposure to a variety of fixed income sectors. However, the majority of the BCA s assets are allocated to U.S. Treasury securities, corporate bonds, and mortgage-backed securities. Similar to many fixed income indices, the relative allocation of each sector within BCA largely depends on the current composition of the fixed income market and particularly on new issuance within each sector. For example, if more corporate bonds are being issued relative to Treasuries and mortgage-backed securities, BCA s allocation to corporate bonds will likely increase over time. U.S. Treasury securities currently account for approximately 33% of BCA. Treasury securities are direct obligations of the U.S. government and are thus considered to be virtually free of default risk. As expected, during the credit turmoil of 2008, U.S. Treasury securities appeared to provide a safe haven for investors, contrasting with the losses suffered by the nonagency mortgage and corporate bond sectors. In fact, while investment-grade corporate bonds (as represented by the Barclays Capital U.S. Credit Index 2 ) declined just over 3% in 2008, the broad U.S. Treasury market (as represented by the Barclays Capital U.S. Treasury Index 3 ) returned nearly 14%. Consequently, BCA outperformed the majority of active fixed income managers during the year, in part as a result of its higher allocation to U.S. Treasuries relative to the average active fixed income manager. As Chart 1 illustrates, the BCA s allocation to U.S. Treasury securities has risen materially over the past several years. The increase can be attributed to both an increase in supply (new issuance) of Treasuries by the U.S. Government and a general decrease in issuance by other fixed income sectors. Issuing Treasury securities is a primary method of funding federal spending. Therefore, as the government increased spending to provide support during the recession and credit crisis, Treasury issuance rose as well. Meanwhile, turmoil in the credit markets led to a meaningful reduction in issuance within the corporate and securitized (i.e., mortgage-backed securities) sectors, as corporations found it difficult to borrow money and demand for these types of fixed income instruments essentially disappeared. While corporate bond issuance and demand has rebounded over the past year, the allocation to U.S. Treasuries within the BCA remains near its highest level in over ten years. Chart 1 Barclays Capital U.S. Aggregate Bond Index: % Allocation to U.S. Treasuries (January 29, March 31, 2011) Source: Barclays Capital

4 Current Yield Levels and Implications for Future Treasury Returns Given U.S. Treasury securities strong relative performance during the recent credit contraction and their minimal default risk, investors may view the benchmark s increasing allocation to Treasuries as advantageous. In fact, even over longer time periods, U.S. Government bonds appear to provide competitive returns. For example, Long-Term Government Bond* returns over the ten-year period from 1/01 12/10 were approximately 7.9% annualized. This is superior to equity performance (as represented by the S&P 500 Index 4 ), which achieved annualized returns of only 1.4% over the same period. However, achieving similar fixed income results going forward, for the Treasury sector and the benchmark as a whole, may be difficult. In particular, current low yield levels and the inverse relationship between fixed income prices and yield movements could present potential headwinds. Chart 2 Yield on 10-Year U.S. Treasury Bond The total return of a fixed income security over a given period is generally calculated using a coupon payment and any changes in the security s price. While coupon payments are generally fixed in nature (i.e., represent a fixed dollar amount and occur at designated intervals), the price of a fixed income security varies over time and moves inversely with changes in interest rates (yields). Accordingly, periods of rising (falling) interest rates are generally associated with a decline (increase) in the price of fixed income securities. Depending on the magnitude and direction of interest rate movements over a given period, a fixed income security may generate total returns above or below its fixed coupon payment. While U.S. Treasury returns from 1/01 12/10 were competitive, it should be noted that the yield on the ten-year U.S. Treasury Bond decreased from approximately 5.1% to 3.4% during that time. Over this period, Treasury coupon* returns amounted to approximately 4.9% annualized, while the price appreciation component (a result of falling yields) boosted total returns to 7.9%. The environment today is noticeably different. As Chart 2 shows, government bond yields are currently between 3% and 4%. Source: FactSet As Chart 3 on the next page illustrates, with yields near 40- year lows, the future ten-year returns for government bonds could be as low as 2%-3%. Moreover, in today s low yield environment, further yield declines appear less likely (although possible in the near term), thereby reducing the potential for bond price appreciation in response to falling interest rates. As a result, total returns for government bonds may be closer to their coupon returns going forward. With regards to BCA, about 90% of the index s total returns have been attributable to coupon payments since it s inception in Therefore, the current low level of yields may have additional adverse implications for future returns as lower coupon bonds are incorporated into the benchmark. Given this environment, a passive approach that follows the benchmark may be limited. In contrast, an active investment approach may be able to manage market risks and identify opportunities across all areas of the fixed income markets.

5 Chart 3 Low Yields Have Historically Led to Lower Fixed Income Returns in the Future (July December 2010) Sources: Morningstar, FactSet

6 The Sensitivity of the U.S. Treasury Sector to Interest Rate Movements Among the various sectors of the fixed income markets, the Treasury sector is considered to have the greatest sensitivity to interest rate movements. As Chart 4 shows, the price level of the Bank of America Merrill Lynch U.S. Treasuries Master Index 5 nearly mirrors the changes in yield of the ten-year U.S. Treasury Bond. As such, an increase (decline) in yields is almost always associated with a decline (increase) in the price level of the index. Moreover, we note that the duration (i.e., interest rates sensitivity) of the U.S. Treasury sector has increased since the middle of 2007 from approximately 4.9 years to 5.3 years. Given this heightened interest rate sensitivity, BCA s increasing allocation to Treasuries may provide an additional performance headwind during a period of expected rising interest rates. Chart 4 (January March 2011) While the inverse relationship between prices and interest rate movements generally holds across fixed income sectors, certain sectors of the fixed income market trade at yields above that of Treasury securities. Without the perceived backing of the U.S. government, many sectors demand a higher premium (or higher yield) for the additional risk. These sectors include corporate bonds and mortgage-backed securities and are sometimes collectively referred to as spread sectors. The relative performance of these sectors depends not only on the absolute trend in interest rate movements, but also on how their yields move in relation to that of U.S. Treasuries. For example, if overall interest rates rise, but yields on U.S. Treasuries increase by a greater amount than those of corporate bonds, the spread between Treasuries and corporate bonds should decrease. This spread tightening can help boost the relative performance of corporate bonds. (If corporate bond yields rise by less than Treasury yields, their prices typically fall by less than Treasuries). As Chart 5 illustrates, the current spread between investment-grade corporate bonds and Treasuries remains relatively attractive. A further tightening of the spread could partly mitigate the effects of rising interest rates. Source: FactSet Chart 5 (January January 2011) Source: FactSet (Right) (Left) *Represents the spread between the yield on long-term corporate AA rated bonds and the yield on the constant maturity 10-year U.S. Treasury Bond

7 Conclusion While index-based fixed income strategies may provide investors with exposure to a broad range of investment-grade fixed income securities, the current composition of BCA may be a source of potential risks in today s market environment. Most notably, the benchmark s increasing allocation to U.S. Treasury securities could represent a performance headwind in light of current low yield levels and the general sensitivity of Treasury prices to rising interest rates. With an investment strategy based on the benchmark, a passive approach would be restricted to this current composition of the index. In contrast, given the dynamic nature of fixed income markets, an active strategy allows for the ability to adjust to changing market conditions. More specifically, active management provides the flexibility to adjust a portfolio s overall duration in response to interest rate movements, as well as allocate assets to the most attractive fixed income sectors and securities depending on the market environment. Perhaps most importantly, an active approach to fixed income management can also take into account an investor s long-term goals, objectives, and risk tolerance in implementing the most appropriate fixed income investment strategy. 1 The Barclays Capital U.S. Aggregate Bond Index ( BCA ) is an unmanaged index that represents the U.S. domestic investment-grade bond market. It is a market value-weighted index of investmentgrade debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities of one year or more. The Index returns do not reflect any fees or expenses. Index returns provided by Interactive Data. 2 The Barclays Capital U.S. Credit Index is an unmanaged index considered representative of publicly issued, fixed-rate, nonconvertible, dollar-denominated, SEC-registered, investment-grade corporate debt. The Index returns reflect total returns, which include reinvestment of dividends. Index returns provided by Morningstar. 3 The Barclays Capital U.S. Treasury Index is an unmanaged index of U.S Treasuries, agency bonds, and 1-3 Year U.S. government obligations. The Index returns reflect total returns, which include reinvestment of dividends. Index returns provided by Morningstar. 4 The S&P 500 Total Return Index is an unmanaged, capitalization-weighted measure of 500 widely held common stocks listed on the New York Stock Exchange, American Stock Exchange, and the Over-the-Counter market. The Index returns assume daily reinvestment of dividends and do not reflect any fees or expenses. Index returns provided by Bloomberg. 5 The Bank of America ( BofA ) Merrill Lynch U.S. Treasury Master Index is an unmanaged index of sovereign debt publicly issued by the U.S. government in its domestic market. The securities must have at least one year remaining term to final maturity, a fixed coupon schedule, and a minimum amount outstanding of $1 billion. The Index is denominated in U.S. Dollars. Index returns provided by Bloomberg. *Representative of Ibbotson Associates Stocks, Bonds, Bills, and Inflation as of 12/31/10. Manning & Napier Advisors, Inc. ( Manning & Napier ) is governed under the regulations of the U.S. Securities and Exchange Commission (SEC). Analysis: Manning & Napier. Sources: FINRA, Wilshire Associates, U.S. Securities and Exchange Commission, Investopedia, BlackRock Investments LLC, Northern Trust, Morningstar, Ned Davis Research, Inc. J.P. Morgan, Standard & Poors, Board of Governors of the Federal Reserve System, FactSet, Barclays Capital. All investments contain risk and may lose value. This material contains the opinions of Manning & Napier Advisors, Inc., which are subject to change based on evolving market and economic conditions. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. SMA-PUB012 USCDN (5/11)

Impact of rising interest rates on preferred securities

Impact of rising interest rates on preferred securities Impact of rising interest rates on preferred securities This report looks at the risks preferred investors may face in a rising-interest-rate environment. We are currently in a period of historically low

More information

FLOATING RATE BANK LOANS: A BREAK FROM TRADITION FOR INCOME-SEEKING INVESTORS

FLOATING RATE BANK LOANS: A BREAK FROM TRADITION FOR INCOME-SEEKING INVESTORS FLOATING RATE BANK LOANS: A BREAK FROM TRADITION FOR INCOME-SEEKING INVESTORS With about $713 billion in assets, the bank loan market is roughly half the size of the high yield market. However, demand

More information

FLOATING RATE BANK LOANS: A BREAK FROM TRADITION FOR INCOME-SEEKING INVESTORS. Why does the bank loan sector remain so attractive?

FLOATING RATE BANK LOANS: A BREAK FROM TRADITION FOR INCOME-SEEKING INVESTORS. Why does the bank loan sector remain so attractive? FLOATING RATE BANK LOANS: A BREAK FROM TRADITION FOR INCOME-SEEKING INVESTORS Bank loans present a compelling income opportunity and a portfolio diversifier that provides protection against traditional

More information

BlackRock Diversified Income Portfolio. A portfolio from Fidelity Investments designed to seek income while managing risk

BlackRock Diversified Income Portfolio. A portfolio from Fidelity Investments designed to seek income while managing risk BlackRock Diversified Income Portfolio A portfolio from Fidelity Investments designed to seek income while managing risk Fidelity Investments has formed a strategic alliance with BlackRock Investment Management,

More information

Hillswick Asset Management, LLC Core Fixed Income Composite

Hillswick Asset Management, LLC Core Fixed Income Composite Year End (Millions) USD (Millions) Assets Number of Accounts Hillswick Asset Management, LLC Core Fixed Income Gross Aggregate Gov't/Credit Dispersion Barclays Capital Aggregate Gov't/Credit 2014 1,372

More information

Rethinking Fixed Income:

Rethinking Fixed Income: Rethinking Fixed Income: The Importance of Income and Flexibility January 2011 Executive Summary Over the past 30 years, fixed-income investors have benefited from one of the largest secular trends in

More information

Fixed Income in a Rising Rate Environment

Fixed Income in a Rising Rate Environment Fixed Income in a Rising Rate Environment Market Commentary May 2016 SINCE THE FIRST FEDERAL FUNDS RATE INCREASE IN DECEMBER 2015, interest rates have generally declined. This counterintuitive result underscores

More information

COMMUNITY FOUNDATION OF GREATER MEMPHIS, INC. INVESTMENT GUIDELINES FOR MONEY MARKET POOL

COMMUNITY FOUNDATION OF GREATER MEMPHIS, INC. INVESTMENT GUIDELINES FOR MONEY MARKET POOL INVESTMENT GUIDELINES FOR MONEY MARKET POOL discretionary Money Market Pool is expected to pursue their stated investment strategy and follow the investment guidelines and objectives set forth herein.

More information

Uncovering Income in a Rising-Rate Environment

Uncovering Income in a Rising-Rate Environment ederated Uncovering Income in a Rising-Rate Environment NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE The Yield-Seekers Challenge Strategies for a Rising-Rate Environment As the economy continues to

More information

The Risk of Fixed Income Indexing vs. Active Multi-Sector Management

The Risk of Fixed Income Indexing vs. Active Multi-Sector Management Pioneer Perspectives TM May 2012 The Risk of Fixed Income Indexing vs. Active Multi-Sector Management A Different Future for Fixed Income Investors? Tepid economic growth coupled with volatile equity markets

More information

HIGH QUALITY PREMIER OUR PHILOSOPHY THE ATTRIBUTES OUR APPROACH

HIGH QUALITY PREMIER OUR PHILOSOPHY THE ATTRIBUTES OUR APPROACH HIGH QUALITY PREMIER September 30, 2015 (3Q) FACT SHEET OUR PHILOSOPHY We believe that securities with stable and predictable cash flows, and low credit and event risk produce consistent returns while

More information

In Search of Yield. Actively Managed High Yield Bond Funds May Offer Long-Term Value

In Search of Yield. Actively Managed High Yield Bond Funds May Offer Long-Term Value In Search of Yield Actively Managed High Yield Bond Funds May Offer Long-Term Value In Search of Yield The Case for Actively Managed High Yield Bond Funds CONTENTS 2 Losing Ground to Inflation: The Impact

More information

The Case for Senior Loans

The Case for Senior Loans The Case for 1.877.622.5552 www.firsttrust.ca : A Potential Opportunity for Investors With interest rates at historically low levels, these are challenging times to invest for income. At the same time,

More information

Why Consider Bank Loan Investing?

Why Consider Bank Loan Investing? Why Consider Bank Loan Investing? September 2012 Bank loans continue to increase in popularity among a variety of investors in search of higher yield potential than other types of bonds, with lower relative

More information

Fixed Income in a Rising Rate Environment

Fixed Income in a Rising Rate Environment Fixed Income in a Rising Rate Environment With interest rates at historically low levels, fixed income investors have become increasingly concerned about rising rates and how their portfolios might be

More information

Holding the middle ground with convertible securities

Holding the middle ground with convertible securities January 2015» White paper Holding the middle ground with convertible securities Eric N. Harthun, CFA Portfolio Manager Robert L. Salvin Portfolio Manager Key takeaways Convertible securities are an often-overlooked

More information

Guide to mutual fund investing. Start with the basics

Guide to mutual fund investing. Start with the basics Guide to mutual fund investing Start with the basics Pursue your financial goals Why do you invest? For a rainy day? A secure retirement? Funding a college tuition? Having a specific goal in mind will

More information

The Case for a Custom Fixed Income Benchmark. ssga.com/definedcontribution REFINING THE AGG

The Case for a Custom Fixed Income Benchmark. ssga.com/definedcontribution REFINING THE AGG The Case for a Custom Fixed Income Benchmark ssga.com/definedcontribution REFINING THE AGG For decades, the Barclays US Aggregate Index (the Agg ) has been a popular benchmark for core bond investment

More information

Today s bond market is riskier and more volatile than in several generations. As

Today s bond market is riskier and more volatile than in several generations. As Fixed Income Approach 2014 Volume 1 Executive Summary Today s bond market is riskier and more volatile than in several generations. As interest rates rise so does the anxiety of fixed income investors

More information

Objective: Avoiding Market Declines*

Objective: Avoiding Market Declines* INVESTOR PRESENTATION DYNAMIC FIXED INCOME PORTFOLIOS Objective: Avoiding Market Declines* Toews 1750 Zion Road, Suite 201 Northfield, NJ 08225 TL (877) 863-9726 www.toewscorp.com *There can be no assurance

More information

High Yield Fixed Income Credit Outlook

High Yield Fixed Income Credit Outlook High Yield Fixed Income Credit Outlook Brendan White, CFA Portfolio Manager, Touchstone High Yield Fund Fort Washington Investment Advisors, Inc. September 28, 2011 The opinions expressed are current as

More information

Fixed Income Liquidity in a Rising Rate Environment

Fixed Income Liquidity in a Rising Rate Environment Fixed Income Liquidity in a Rising Rate Environment 2 Executive Summary Ò Fixed income market liquidity has declined, causing greater concern about prospective liquidity in a potential broad market sell-off

More information

An actively managed approach for today s fixed-income markets

An actively managed approach for today s fixed-income markets Q3 2015 Putnam multi-sector fixed-income funds An actively managed approach for today s fixed-income markets D. William Kohli Michael V. Salm Paul D. Scanlon, CFA Putnam s three Co-Heads of Fixed each

More information

High Yield Bonds in a Rising Rate Environment August 2014

High Yield Bonds in a Rising Rate Environment August 2014 This paper examines the impact rising rates are likely to have on high yield bond performance. We conclude that while a rising rate environment would detract from high yield returns, historically returns

More information

The essentials of investing for retirement.

The essentials of investing for retirement. The essentials of investing for retirement. Fidelity has been helping people invest for retirement for more than 65 years. Some investors use our actively managed and index mutual funds. Some use our powerful

More information

Taxable Fixed Income. Invesco Floating Rate Fund (AFRAX)

Taxable Fixed Income. Invesco Floating Rate Fund (AFRAX) Taxable Fixed Income Invesco Floating Rate Fund (AFRAX) Senior Secured Loans A unique asset class Floating rate funds, also called senior loan funds, invest in senior secured loans. The loans have very

More information

Building and Interpreting Custom Investment Benchmarks

Building and Interpreting Custom Investment Benchmarks Building and Interpreting Custom Investment Benchmarks A White Paper by Manning & Napier www.manning-napier.com Unless otherwise noted, all fi gures are based in USD. 1 Introduction From simple beginnings,

More information

NPH Fixed Income Research Update. Bob Downing, CFA. NPH Senior Investment & Due Diligence Analyst

NPH Fixed Income Research Update. Bob Downing, CFA. NPH Senior Investment & Due Diligence Analyst White Paper: NPH Fixed Income Research Update Authored By: Bob Downing, CFA NPH Senior Investment & Due Diligence Analyst National Planning Holdings, Inc. Due Diligence Department National Planning Holdings,

More information

An Attractive Income Option for a Strategic Allocation

An Attractive Income Option for a Strategic Allocation An Attractive Income Option for a Strategic Allocation Voya Senior Loans Suite A strategic allocation provides potential for high and relatively steady income through most credit and rate cycles Improves

More information

FIXED INCOME INVESTORS HAVE OPTIONS TO INCREASE RETURNS, LOWER RISK

FIXED INCOME INVESTORS HAVE OPTIONS TO INCREASE RETURNS, LOWER RISK 1 FIXED INCOME INVESTORS HAVE OPTIONS TO INCREASE RETURNS, LOWER RISK By Michael McMurray, CFA Senior Consultant As all investors are aware, fixed income yields and overall returns generally have been

More information

Opportunities in credit higher quality high-yield bonds

Opportunities in credit higher quality high-yield bonds Highlights > > Default rates below the long-term average > > Valuations wide of historical average in BB and B rated credit > > Despite sluggish economy, high yield can still perform well > > High yield

More information

Fixed Income Investing: What s an Investor to Do?

Fixed Income Investing: What s an Investor to Do? INSIGHTS Fixed Income Investing: What s an Investor to Do? July 2012 203.621.1700 2012, Rocaton Investment Advisors, LLC Executive Summary As interest rates have fallen steadily over the past 20 years,

More information

High Yield Bonds A Primer

High Yield Bonds A Primer High Yield Bonds A Primer With our extensive history in the Canadian credit market dating back to the Income Trust period, our portfolio managers believe that there is considerable merit in including select

More information

An Alternative to Fixed Rate Bonds

An Alternative to Fixed Rate Bonds An Alternative to Fixed Rate Bonds Voya Senior Loans Suite offered by Aston Hill Financial Seeks to pay high income in various rate environments One of the world s largest dedicated senior loan teams Five

More information

Time to Invest in Short-Term Bonds?

Time to Invest in Short-Term Bonds? First Quarter 2010 Time to Invest in Short-Term Bonds? Executive Summary This paper outlines why now may be an opportune time to invest in short-term bonds. We believe short-term bonds offer: Less downside

More information

ANY GAS LEFT IN THE HIGH-YIELD MUNICIPAL TANK?

ANY GAS LEFT IN THE HIGH-YIELD MUNICIPAL TANK? May 9, 2016 ANY GAS LEFT IN THE HIGH-YIELD MUNICIPAL TANK? A favorable credit environment and technical factors have contributed to strong high-yield municipal performance. We see limited room for further

More information

T. Rowe Price Target Retirement 2030 Fund Advisor Class

T. Rowe Price Target Retirement 2030 Fund Advisor Class T. Rowe Price Target Retirement 2030 Fund Advisor Class Supplement to Summary Prospectus Dated October 1, 2015 Effective February 1, 2016, the T. Rowe Price Mid-Cap Index Fund and the T. Rowe Price Small-Cap

More information

Investing in a Rising Rate Environment

Investing in a Rising Rate Environment Investing in a Rising Rate Environment How Rising Interest Rates Affect Bond Portfolios By Baird s Private Wealth Management Research Summary With historically low interest rates and the unprecedented

More information

Fund commentary. John Hancock Lifestyle Portfolios Q1 2016

Fund commentary. John Hancock Lifestyle Portfolios Q1 2016 Fund commentary John Hancock Lifestyle Portfolios Seek: Long-term growth of capital or a balance between a high level of current income and growth of capital Use for: Broadly diversified, risk-targeted

More information

Seeking a More Efficient Fixed Income Portfolio with Asia Bonds

Seeking a More Efficient Fixed Income Portfolio with Asia Bonds Seeking a More Efficient Fixed Income Portfolio with Asia s Seeking a More Efficient Fixed Income Portfolio with Asia s Drawing upon different drivers for performance, Asia fixed income may improve risk-return

More information

Are Unconstrained Bond Funds a Substitute for Core Bonds?

Are Unconstrained Bond Funds a Substitute for Core Bonds? TOPICS OF INTEREST Are Unconstrained Bond Funds a Substitute for Core Bonds? By Peter Wilamoski, Ph.D. Director of Economic Research Philip Schmitt, CIMA Senior Research Associate AUGUST 2014 The problem

More information

WHAT ROLE DO BONDS PLAY IN YOUR PORTFOLIO? Guard Against Interest Rate Risk and Credit Events

WHAT ROLE DO BONDS PLAY IN YOUR PORTFOLIO? Guard Against Interest Rate Risk and Credit Events RETHINK YOUR BONDS Building Better Bond Portfolios Interest rates may inch up this year, but expect them to be low for some time to come. You can continue to achieve your fixed income goals in this environment

More information

IU Retirement Plan (57524) Start investing in yourself today, with help from IU Retirement Plan and Fidelity.

IU Retirement Plan (57524) Start investing in yourself today, with help from IU Retirement Plan and Fidelity. IU Retirement Plan (57524) Start investing in yourself today, with help from IU Retirement Plan and Fidelity. Invest some of what you earn today for what you plan to accomplish tomorrow. Dear Indiana University

More information

Fund commentary. John Hancock Retirement Living Portfolios Q1 2016

Fund commentary. John Hancock Retirement Living Portfolios Q1 2016 John Hancock Retirement Living Portfolios Fund commentary Seek: Long-term growth of capital or a balance between a high level of current income and growth of capital Use for: Broadly diversified, risk-targeted

More information

Taxable Fixed Income Outlook: Waiting for Those Rising Rates

Taxable Fixed Income Outlook: Waiting for Those Rising Rates Taxable Fixed Income Outlook: Waiting for Those Rising Rates Market Commentary Fourth quarter 2014 MOST INVESTORS UNDERSTAND THAT INTEREST RATES ARE UNPREDICTABLE. But we suspect few believed rates could

More information

MainStay VP Janus Balanced Portfolio

MainStay VP Janus Balanced Portfolio Summary Prospectus May 1, 2015 MainStay VP Janus Balanced Portfolio To Statutory Prospectus To Statement of Additional Information Before you invest, you may want to review the Portfolio's Prospectus,

More information

Bonds, in the most generic sense, are issued with three essential components.

Bonds, in the most generic sense, are issued with three essential components. Page 1 of 5 Bond Basics Often considered to be one of the most conservative of all investments, bonds actually provide benefits to both conservative and more aggressive investors alike. The variety of

More information

Bond Fund of the TIAA-CREF Life Funds

Bond Fund of the TIAA-CREF Life Funds Summary Prospectus MAY 1, 2015 Bond Fund of the TIAA-CREF Life Funds Ticker: TLBDX Before you invest, you may want to review the Fund s prospectus, which contains more information about the Fund and its

More information

Balanced Fund RPBAX. T. Rowe Price SUMMARY PROSPECTUS

Balanced Fund RPBAX. T. Rowe Price SUMMARY PROSPECTUS SUMMARY PROSPECTUS RPBAX May 1, 2016 T. Rowe Price Balanced Fund A fund seeking capital growth and current income through a portfolio of approximately 65% stocks and 35% fixed income securities. Before

More information

TRANSAMERICA SERIES TRUST Transamerica Vanguard ETF Portfolio Conservative VP. Supplement to the Currently Effective Prospectus and Summary Prospectus

TRANSAMERICA SERIES TRUST Transamerica Vanguard ETF Portfolio Conservative VP. Supplement to the Currently Effective Prospectus and Summary Prospectus TRANSAMERICA SERIES TRUST Transamerica Vanguard ETF Portfolio Conservative VP Supplement to the Currently Effective Prospectus and Summary Prospectus * * * The following replaces in their entirety the

More information

Bond Market Perspectives

Bond Market Perspectives LPL FINANCIAL RESEARCH Bond Market Perspectives October 1, 2013 Many Happy Returns Anthony Valeri, CFA Market Strategist LPL Financial Highlights September bond market performance saw gains across all

More information

Reframing Expectations

Reframing Expectations Reframing Expectations Recognizing the Challenges and Opportunities in Fixed Income By Baird s Asset Manager Research HIGHLIGHTS: Even if facing headwinds, bonds still serve important roles in a portfolio,

More information

High-Yield Spread U.S. 10-Year Treasury Yield Investment Grade Spread

High-Yield Spread U.S. 10-Year Treasury Yield Investment Grade Spread WisdomTree ETFs BOFA MERRILL LYNCH HIGH YIELD BOND ZERO DURATION FUND HYZD The U.S. high-yield bond market has been one of the best-performing subsets of the fixed income investable universe over the past

More information

FREE MARKET U.S. EQUITY FUND FREE MARKET INTERNATIONAL EQUITY FUND FREE MARKET FIXED INCOME FUND of THE RBB FUND, INC. PROSPECTUS.

FREE MARKET U.S. EQUITY FUND FREE MARKET INTERNATIONAL EQUITY FUND FREE MARKET FIXED INCOME FUND of THE RBB FUND, INC. PROSPECTUS. FREE MARKET U.S. EQUITY FUND FREE MARKET INTERNATIONAL EQUITY FUND FREE MARKET FIXED INCOME FUND of THE RBB FUND, INC. PROSPECTUS December 31, 2014 Investment Adviser: MATSON MONEY, INC. 5955 Deerfield

More information

Six Strategies for Volatile Markets When markets get choppy, it pays to have a plan for your investments, and to stick to it.

Six Strategies for Volatile Markets When markets get choppy, it pays to have a plan for your investments, and to stick to it. Six Strategies for Volatile Markets When markets get choppy, it pays to have a plan for your investments, and to stick to it. Fidelity Viewpoints 8/22/15 The markets have become volatile again, prompted

More information

Capital Markets Review Q3 2010

Capital Markets Review Q3 2010 Capital Markets Review Q3 2010 Reviewing the quarter ended June 30, 2010 Ross Marino, CFP, ChFC 210-4 Avondale Ave. Wilmington, NC 28403 www.rossmarino.com Material prepared by Raymond James for use by

More information

Pioneer Multi-Asset Ultrashort Income Fund

Pioneer Multi-Asset Ultrashort Income Fund Pioneer Multi-Asset Ultrashort Income Fund A diversified, investment grade-focused approach to floating rate investing MAFRX INVESTOR GUIDE Pioneer Multi- Asset Ultrashort Income Fund* Share Class A C

More information

Retirement Balanced Fund

Retirement Balanced Fund SUMMARY PROSPECTUS TRRIX October 1, 2015 T. Rowe Price Retirement Balanced Fund A fund designed for retired investors seeking capital growth and income through investments in a combination of T. Rowe Price

More information

Global high yield: We believe it s still offering value December 2013

Global high yield: We believe it s still offering value December 2013 Global high yield: We believe it s still offering value December 2013 02 of 08 Global high yield: we believe it s still offering value Patrick Maldari, CFA Senior Portfolio Manager North American Fixed

More information

Core bond funds know what you re investing in

Core bond funds know what you re investing in Core bond fixed income Wells Fargo Advantage Core Bond Fund February 2015 Core bond funds know what you re investing in Wells Fargo Advantage Funds Fixed-Income Team Just about every retirement plan participant

More information

Investment insight. Fixed income the what, when, where, why and how TABLE 1: DIFFERENT TYPES OF FIXED INCOME SECURITIES. What is fixed income?

Investment insight. Fixed income the what, when, where, why and how TABLE 1: DIFFERENT TYPES OF FIXED INCOME SECURITIES. What is fixed income? Fixed income investments make up a large proportion of the investment universe and can form a significant part of a diversified portfolio but investors are often much less familiar with how fixed income

More information

PIMCO Foreign Bond Fund (U.S. Dollar- Hedged)

PIMCO Foreign Bond Fund (U.S. Dollar- Hedged) Your Global Investment Authority PIMCO Foreign Bond Fund (U.S. Dollar- Hedged) SUMMARY PROSPECTUS July 31, 2015 (as supplemented December 1, 2015) Share Class: Inst P Admin D A C R Ticker: PFORX PFBPX

More information

How Smaller Stocks May Offer Larger Returns

How Smaller Stocks May Offer Larger Returns Strategic Advisory Solutions April 2015 How Smaller Stocks May Offer Larger Returns In an environment where the US continues to be the growth engine of the developed world, investors may find opportunity

More information

LifePath Index 2060 Fund Q

LifePath Index 2060 Fund Q Release Date: 9-3-215 LifePath Index 26 Fund Q Standard & Poor's 5 Index LifePath Index 26 Custom Target Date 251+... Allocation of Stocks and Bonds 1 8 6 4 2 45 4 35 3 25 2 15 1 5 Years Until Retirement

More information

Prospectus Socially Responsible Funds

Prospectus Socially Responsible Funds Prospectus Socially Responsible Funds Calvert Social Investment Fund (CSIF) Balanced Portfolio Equity Portfolio Enhanced Equity Portfolio Bond Portfolio Money Market Portfolio Calvert Social Index Fund

More information

PIONEER ADVISORY: Pioneer Absolute Return Credit Fund Name Change

PIONEER ADVISORY: Pioneer Absolute Return Credit Fund Name Change May 2013 PIONEER ADVISORY: Pioneer Absolute Return Credit Fund Name Change Effective June 17, 2013, the Fund s name will change to Pioneer Dynamic Credit Fund. It should be noted that the Fund s portfolio

More information

Our verdict is in: Offshore high yield exchange-traded funds don t deliver

Our verdict is in: Offshore high yield exchange-traded funds don t deliver For investment professionals only - not for use by retail investors Our verdict is in: Offshore high yield exchange-traded funds don t deliver November 2014 The explosive growth witnessed by ETFs in the

More information

New York's 529 Advisor-Guided College Savings Program

New York's 529 Advisor-Guided College Savings Program New York's 529 Advisor-Guided College Savings Program yr AVERAGE TOTAL Expense ratio AGE-BASED PORTFOLIOS JPMorgan 529 Aggressive Age-Based Portfolio (Age 0-5) 2,3,4,5,6,7,8,9,37 Class A - 5/4/202, 5705,

More information

Fixed Income Strategy Quarterly April 2015

Fixed Income Strategy Quarterly April 2015 Doucet Asset Management Fixed Income Strategy Quarterly April 2015 The first quarter of 2015 was a fairly uneventful one. Across the world, the pullback in yields we witnessed in 2014 continued; however,

More information

Insurance Dedicated Funds: Variable Insurance Trusts

Insurance Dedicated Funds: Variable Insurance Trusts At a Glance September 2015 Insurance Dedicated Funds: Variable Insurance Trusts Our goal at GSAM is to meet the financial goals of investors worldwide, now and in the future, with innovative investment

More information

Vanguard Target Retirement Funds

Vanguard Target Retirement Funds Vanguard Target Retirement Funds Supplement to the Prospectus Dated January 27, 2014 Prospectus Text Changes The Average Annual Total Returns table for Vanguard Target Retirement Income Fund is replaced

More information

POPULAR BOND INDEXES MAY CONTAIN SIGNIFICANT EXPOSURE TO NON-U.S. ISSUERS. Non-U.S. Exposure in the Most Popular Corporate Bond Indexes

POPULAR BOND INDEXES MAY CONTAIN SIGNIFICANT EXPOSURE TO NON-U.S. ISSUERS. Non-U.S. Exposure in the Most Popular Corporate Bond Indexes WisdomTree ETFs STRATEGIC CORPORATE BOND FUND CRDT In the current market environment, investors have increasingly targeted corporate bonds 1 as one approach to enhance income in their portfolios. Through

More information

Arizona State Retirement System Investment Committee Fixed Income Asset Class Review

Arizona State Retirement System Investment Committee Fixed Income Asset Class Review Arizona State Retirement System Investment Committee Fixed Income Asset Class Review June 22, 2015 EXECUTIVE SUMMARY U.S. Equity Arizona Asset State Class Retirement Overview System Fixed Income Asset

More information

With interest rates at historically low levels, and the U.S. economy showing continued strength,

With interest rates at historically low levels, and the U.S. economy showing continued strength, Managing Interest Rate Risk in Your Bond Holdings THE RIGHT STRATEGY MAY HELP FIXED INCOME PORTFOLIOS DURING PERIODS OF RISING INTEREST RATES. With interest rates at historically low levels, and the U.S.

More information

to Wealth Management resources of one of the world s largest financial services firms. The Caribbean Group

to Wealth Management resources of one of the world s largest financial services firms. The Caribbean Group A Defined Approach to Wealth Management Giving UWI access to the combined resources of one of the world s largest financial services firms. The Caribbean Group The information in this presentation is intended

More information

Floating Rate Loans ( Senior Loans, Bank Loans, Leveraged Loans ) Senior (Unsecured) Debt Traditional Bonds, Convertible Bonds

Floating Rate Loans ( Senior Loans, Bank Loans, Leveraged Loans ) Senior (Unsecured) Debt Traditional Bonds, Convertible Bonds The Case for Loans Market Commentary February 2016 WHAT ARE FLOATING RATE LOANS? Also commonly referred to as senior secured loans or bank loans, floating rate loans are made by large commercial or investment

More information

Risk Control and Equity Upside: The Merits of Convertible Bonds for an Insurance Portfolio

Risk Control and Equity Upside: The Merits of Convertible Bonds for an Insurance Portfolio Risk Control and Equity Upside: The Merits of Convertible Bonds for an Insurance Portfolio In a survey of insurance company Chief Investment Officers conducted by Eager, Davis & Holmes 1 in May 2009, 43%

More information

Market Linked Certificates of Deposit

Market Linked Certificates of Deposit Market Linked Certificates of Deposit This material was prepared by Wells Fargo Securities, LLC, a registered brokerdealer and separate non-bank affiliate of Wells Fargo & Company. This material is not

More information

Seix Total Return Bond Fund

Seix Total Return Bond Fund Summary Prospectus Seix Total Return Bond Fund AUGUST 1, 2015 (AS REVISED FEBRUARY 1, 2016) Class / Ticker Symbol A / CBPSX R / SCBLX I / SAMFX IS / SAMZX Before you invest, you may want to review the

More information

High-Yield Municipal Bonds

High-Yield Municipal Bonds High-Yield Municipal Bonds 1 ETF Disclosure This material does not constitute an offer to sell or solicitation to buy any security, including shares of any Fund. An offer or solicitation will be made only

More information

The Impact of Interest Rates on Real Estate Securities

The Impact of Interest Rates on Real Estate Securities The Impact of Interest Rates on Real Estate Securities The challenge for real estate securities investors is determining how monetary policy and interest rates affect prices and returns. Highlights Not

More information

High-yield bonds have become a global opportunity

High-yield bonds have become a global opportunity By: Yoshie Phillips, CFA, Senior Research Analyst APRIL 2013 High-yield bonds have become a global opportunity Investors seeking income or attractive total return investments often look into high-yield

More information

Navigating Rising Rates with Active, Multi-Sector Fixed Income Management

Navigating Rising Rates with Active, Multi-Sector Fixed Income Management Navigating Rising Rates with Active, Multi-Sector Fixed Income Management 2 With bond yields near 60-year lows and expected to rise, U.S. core bond investors are increasingly questioning how to mitigate

More information

Unconstrained fixed income may offer a compelling solution for today s bond market challenges

Unconstrained fixed income may offer a compelling solution for today s bond market challenges INVESTMENT OPPORTUNITIES The market direction and your portfolio Unconstrained fixed income may offer a compelling solution for today s bond market challenges Why now? n Elevated risks and prolonged dismal

More information

Understanding Fixed Income Returns: Past, Present and Future by Stephen Kroah,CFA

Understanding Fixed Income Returns: Past, Present and Future by Stephen Kroah,CFA Understanding Fixed Income Returns: Past, Present and Future by Stephen Kroah,CFA In today s economic environment, much discussion is centered around the impact of rising interest rates on fixed income

More information

A GUIDE TO FLOATING RATE BANK LOANS:

A GUIDE TO FLOATING RATE BANK LOANS: Contact information: Advisor Services: (631) 629-4908 E-mail: info@catalystmf.com Website: www.catalystmf.com A GUIDE TO FLOATING RATE BANK LOANS: An Attractive Investment for a Rising Interest Rate Environment

More information

HSBC World Selection Funds April 30, 2016. Monthly Factsheets Class A and C Shares. Investment products: ARE NOT A BANK ARE NOT DEPOSIT OR

HSBC World Selection Funds April 30, 2016. Monthly Factsheets Class A and C Shares. Investment products: ARE NOT A BANK ARE NOT DEPOSIT OR HSBC World Selection Funds April 30, 2016 Monthly Factsheets Class A and C Shares Aggressive Strategy Fund Balanced Strategy Fund Moderate Strategy Fund Conservative Strategy Fund Income Strategy Fund

More information

Positioning Fixed Income for Rising Interest Rates

Positioning Fixed Income for Rising Interest Rates Positioning Fixed Income for Rising Interest Rates Investment Case: High-Yield Bonds Hedged with U.S. Treasuries Market Vectors Investment Grade Floating Rate ETF Designed to hedge the risk of rising interest

More information

Fund Fact Sheet. ExxonMobil Savings Plan

Fund Fact Sheet. ExxonMobil Savings Plan Fund Fact Sheet ExxonMobil Savings Plan ExxonMobil Stock When you buy Exxon Mobil Corporation Common Stock (ExxonMobil stock), you become an ExxonMobil shareholder and an owner of the company. As an owner

More information

Wells Fargo Advantage Dow Jones Target Date Funds SM

Wells Fargo Advantage Dow Jones Target Date Funds SM Wells Fargo Advantage Dow Jones Target Date Funds SM Annual Report February 28, 2015 Wells Fargo Advantage Dow Jones Target Today Fund SM Wells Fargo Advantage Dow Jones Target 2010 Fund SM Wells Fargo

More information

Fixed-income opportunity: Short duration high yield

Fixed-income opportunity: Short duration high yield March 2014 Insights from: An income solution for a low or rising interest-rate environment Generating income is a key objective for many investors, and one that is increasingly difficult to achieve in

More information

Non-FDIC Insured May Lose Value No Bank Guarantee. Time-Tested Investment Strategies for the Long Term

Non-FDIC Insured May Lose Value No Bank Guarantee. Time-Tested Investment Strategies for the Long Term Time-Tested Investment Strategies for the Long Term Invest for the Long-Term Stay the Course Through Ups and Downs History shows that the market goes up and the market goes down. While there may be short-term

More information

Understanding Fixed Income

Understanding Fixed Income Understanding Fixed Income 2014 AMP Capital Investors Limited ABN 59 001 777 591 AFSL 232497 Understanding Fixed Income About fixed income at AMP Capital Our global presence helps us deliver outstanding

More information

Senior Floating Rate Loans

Senior Floating Rate Loans Senior floating rate loans have become a staple of the U.S. debt market and have grown from a market value of $126 billion in 2001 to $607 billion as of year-end 2011. 1 For over 20 years, managed senior

More information

Extended Strategy Descriptions for The Boeing Company Voluntary Investment Plan (VIP)

Extended Strategy Descriptions for The Boeing Company Voluntary Investment Plan (VIP) Extended Strategy Descriptions for The Boeing Company Voluntary Investment Plan (VIP) Strategy descriptions are effective December 12, 2014, unless otherwise noted. U.S. Large Companies Fund The fund invests

More information

BOND ALERT. What Investors Should Know. July 2013 WWW.LONGVIEWCPTL.COM 2 MILL ROAD, SUITE 105

BOND ALERT. What Investors Should Know. July 2013 WWW.LONGVIEWCPTL.COM 2 MILL ROAD, SUITE 105 BOND ALERT July 2013 What Investors Should Know This special report will help you understand the current environment for bonds and discuss how that environment may change with rising interest rates. We

More information

Leader Short-Term Bond Fund. Leader Total Return Fund

Leader Short-Term Bond Fund. Leader Total Return Fund Leader Short-Term Bond Fund Institutional Shares: Investor Shares: Class A Shares: Class C Shares: LCCIX LCCMX LCAMX LCMCX Leader Total Return Fund Institutional Shares: Investor Shares: Class A Shares:

More information

CALVERT UNCONSTRAINED BOND FUND A More Expansive Approach to Fixed-Income Investing

CALVERT UNCONSTRAINED BOND FUND A More Expansive Approach to Fixed-Income Investing CALVERT UNCONSTRAINED BOND FUND A More Expansive Approach to Fixed-Income Investing A Challenging Environment for Investors MOVING BEYOND TRADITIONAL FIXED-INCOME INVESTING ALONE For many advisors and

More information