CHANGING INTEREST RATES

Size: px
Start display at page:

Download "CHANGING INTEREST RATES"

Transcription

1 PRUDENTIAL INVESTMENTS, A PGIM BUSINESS MUTUAL FUNDS CHANGING INTEREST RATES THE IMPACT ON YOUR PORTFOLIO

2 Navigating the fixed income market can be daunting for the average investor. Understanding how changes in interest rates impact a portfolio is critical. We seek to demystify the mechanics around how bond prices are affected by interest rate risk and what factors make a portfolio more or less sensitive to it. How do interest rate changes affect bond investments? What factors influence U.S. interest rates? Where are long-term U.S. interest rates headed? What asset classes performed well during rising rate periods? INTEREST RATES AND BOND PRICES ARE INVERSELY RELATED Historically, bond prices and interest rates move in opposite directions. This happens because as interest rates rise, newly issued bonds carry a higher coupon than previously issued bonds, causing prices of older bonds to drop as they become relatively less attractive to investors. Conversely, older bonds become relatively more attractive than newer bonds issued after interest rates decline. INTEREST RATES BOND PRICE INTEREST RATES BOND PRICE Represents conceptual depiction of bond price and interest rate relationship. For illustrative purposes only.

3 How do interest rate changes affect bond investments? Total return is comprised of yield (the bond s coupon payment) plus market movements (the bond price increase or decrease). The following examples show how the movement of interest rates affects a bond portfolio s returns. RISING INTEREST RATES (Price Decline) NO CHANGE IN INTEREST RATES (No Price Change) DECLINING INTEREST RATES (Price Increase) 7% 5% 5% 5% 5% 3% 2% 0% 2% Price Decrease Investor Total Return No Price Change Investor Total Return Price Increase Investor Total Return The above charts are hypothetical examples and are intended for illustrative purposes only. They do not depict a specific investment. How does the magnitude of interest rate movements affect a bond s total return? The greater the magnitude of change in interest rates, the larger the impact to a bond s price. The example below illustrates the impact of a 1% increase versus a 2% increase in interest rates for a hypothetical XYZ. 1 BOND XYZ 5-year maturity Issued at par ($1,000) rate 3% BOND XYZ CHARACTERISTICS ONE YEAR LATER: 1% Increase 2% Increase 3.0 % 3.0 % + + Price Decrease 3.7 % 8.1 % 1 rate assumes an annual payment. The above charts are hypothetical examples and are intended for illustrative purposes only. They do not depict a specific investment. Investor Total Return ( + Price Decline) 0.7 % 5.1 % visit prudentialfunds.com 3

4 How do interest rate changes affect bond investments? How does a bond s maturity affect its interest rate risk? Longer maturity bonds are more sensitive to interest rate risk than shorter maturity bonds because they have a longer time before the principal is paid back to the investor. 2 BOND MATURING IN 5 YEARS s Years Last Final Principal A shorter maturity bond will provide investors with their principal earlier, which results in lower interest rate risk. BOND MATURING IN 10 YEARS s Years Last Final Principal A longer maturity bond will provide investors with their principal later, which results in higher interest rate risk. 2 The example assumes no options. The above charts are hypothetical examples and are intended for illustrative purposes only. They do not depict a specific investment. The hypothetical assumes both bonds are from the same issuer. 4 CHANGING INTEREST RATES

5 How does a bond s coupon rate affect its interest rate risk? Lower coupon bonds have greater interest rate risk than higher coupon bonds with the same maturity because they have a lower yield cushion meaning they have a smaller percentage of total cash flows that come from income payments. 3 LOWER COUPON BOND = HIGHER INTEREST RATE RISK HIGHER COUPON BOND = LOWER INTEREST RATE RISK s Final s Final Principal Principal Years Last Years Last Lower Investors receive a smaller portion of their total cash flows prior to maturity. Higher Investors receive a larger portion of their total cash flows prior to maturity. Cash flow 1 Cash flow 2 Cash flow 3 Cash flow 4 Principal and final cash flow Cash flow 1 Cash flow 2 Cash flow 3 Cash flow 4 Principal and final cash flow 3 Assumes both bonds are from the same issuer. The above charts are hypothetical examples and are intended for illustrative purposes only. They do not depict a specific investment. visit prudentialfunds.com 5

6 What factors influence U.S. interest rates? In general, changes in short-term interest rates have a greater impact on short-term bonds and changes in long-term interest rates have more impact on long-term bonds. Short-Term In the U.S., short-term interest rates are strongly influenced by the Federal Reserve, which was created by Congress to provide a flexible and stable financial system. Driver SHORT-TERM RATES Federal Reserve Monetary Policy LONG-TERM RATES U.S. GDP The Federal Reserve implements monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices. During a period of slowing economic growth, the Federal Reserve may decide to lower short-term interest rates (fed funds rate) to help stimulate the economy. The Federal Reserve may decide to raise short-term rates in an effort to slow down the economy, which may be growing too fast and result in high inflation. Long-Term Long-term interest rates are primarily influenced by long-term expectations for U.S. economic growth and inflation. Key Factors External Factors Short-Term U.S. Inflation Expectations U.S. Unemployment Rate (%) Short-Term U.S. GDP Growth Expectations Short-Term Global Inflation Expectations Short-Term Global GDP Growth Expectations Long-Term U.S. Inflation Expectations Long-Term U.S. GDP Growth Expectations Long-Term Global Inflation Expectations Long-Term Global GDP Growth Expectations Current Long-Term Global Market They may also be affected by current long-term global market rates. Do short- and long-term interest rates always move in the same direction and by the same magnitude? PARALLEL SHIFT IN RATES HIGH Short- and long-term interest rates are influenced by different factors, and as a result, they may not always move in tandem. Consider three possible rising rate scenarios: LOW Short-Term Intermediate-Term Long-Term Source: Prudential Investments. These three scenarios represent conceptual depictions of future potential movement of short-term and long-term U.S. interest rates. For illustrative purposes only. Short-term rates are rising as the Federal Reserve tightens monetary policy to help slow a growing economy. Long-term rates rise as the market anticipates an increase in economic growth and inflation. 6 CHANGING INTEREST RATES

7 How do global interest rates influence U.S. interest rates? While U.S. short-term interest rates are strongly influenced by Federal Reserve monetary policy, long-term U.S. interest rates are affected by what is happening outside the U.S. U.S. long-term rates are currently well above other developed market interest rates, leading many market participants to conclude that, even if U.S. long-term rates move higher, there are limits as to how much they can diverge from the current low rate global landscape. 3.6% 1.4% 1.5% 1.6% 1.8% 2.0% 2.1% 2.3% 2.5% 2.6% 2.9% 0.3% 0.6% 0.8% 1.0% 0.1% Switzerland Japan Germany Netherlands France Canada Hong Kong Italy Spain Britain South Korea United States Portugal Singapore Australia New Zealand Source: 10-year government yields: Bloomberg as of 12/31/2015. CURVE STEEPENER CURVE FLATTENER HIGH HIGH LOW Short-Term Intermediate-Term Long-Term LOW Short-Term Intermediate-Term Long-Term Short-term rates don t move since the Federal Reserve is not making adjustments to monetary policy. Long-term rates are rising as the market anticipates an increase in economic growth and inflation. Short-term rates rise as the Federal Reserve tightens monetary policy to help slow a growing economy. Long-term rates are not moving as the market does not anticipate a substantial increase in economic growth or inflation. visit prudentialfunds.com 7

8 Where are long-term U.S. interest rates headed? Predicting the future path of interest rates is difficult because they are influenced by many factors, including Federal Reserve policies, economic sentiment, foreign central bank policies, and geopolitical events. There are many different ways rates can go in the coming years. 10-year U.S. Treasury yields are at nearrecord lows Future path of U.S. interest rates 8 4? Long-term U.S. interest rates where could they be headed? EXTREME AND ACCELERATED Strong Growth High Inflation MODERATE AND GRADUAL Moderate Growth Moderate Inflation FLAT AND RANGE-BOUND Weak Growth Low Inflation Source of 10-year U.S. Treasury yield data: Bloomberg as of 12/31/2015. Source of scenarios: Prudential Investments. Scenarios 1, 2, and 3 represent conceptual depictions of future potential movement of long-term U.S. interest rates. For illustrative purposes only. 8 CHANGING INTEREST RATES

9 What asset classes performed well during rising rate periods? How often do interest rates rise? Since 1995 there have been eight periods where the 10-Year U.S. Treasury yield rose by 75 basis points or more (a basis point is 1/100 of a percent). Rising rate periods 10-year U.S. Treasury yield movement (1995 to 2015) /95 12/97 12/99 12/01 12/03 12/05 12/07 12/09 12/11 12/13 12/15 10-Year Treasury As rates rise, certain asset classes have historically outperformed Investments such as Global Real Estate, Master Limited Partnerships, High Yield s, Short Duration Municipal s, and Short-Term Corporate s have delivered strong historical returns during rising rate periods. These investments tend to perform in line with the business cycle. As the economy grows or experiences higher inflation, these investments have outperformed more conservative investments like U.S. Government s. Average historical performance during rising rate periods 5 (as shown in the chart above) 24.9% 23.9% 16.3% 12.9% 7.7% 4.3% 3.3% MLPs Global Real Estate Short Duration High Yield s Bank Loans Non-Traditional s Short Duration High Income Municipal s Short-Term Corporate s 2.1% U.S. Treasury 4 Source: Morningstar Direct as of 12/31/15. Calculated by Prudential Investments LLC using data presented in Morningstar software products. All rights reserved. Used with permission. Rising interest rate periods are defined by the monthly movement of the 10-year Treasury yield, using a threshold of 75+ basis points or greater. The 10-year Treasury yield is a commonly used reference point for tracking the general movement of U.S. interest rates. The decision to use a 75+ basis point threshold to define a rising rate period was done so that an investor could see multiple instances of rising rate periods to better assess how different asset classes performed during these types of periods. 5 Source: Morningstar Direct as of 12/31/15. Calculated by Prudential Investments LLC using data presented in Morningstar software products. All rights reserved. Used with permission. All indices are unmanaged. An investment cannot be made in an index. Please see page 10 for asset class breakdowns and corresponding indices. visit prudentialfunds.com 9

10 Risk Information Mutual fund investing involves risk. Some mutual funds have more risk than others. The investment return and principal value will fluctuate, and shares, when sold, may be worth more or less than the original cost, and it is possible to lose money. There is no guarantee a fund s objectives will be achieved. Fixed income investments are subject to interest rate risk, where their value will decline as interest rates rise. Diversification does not assure a profit or protect against loss in declining markets. Global Real Estate Investing in real estate poses certain risks related to overall and specific economic conditions as well as risks related to individual property, credit, and interest rate fluctuations. Real estate companies and REITs may be leveraged, which increases risk. Master Limited Partnerships (MLP) are subject to complicated and in some cases unsettled accounting, tax, and valuation issues as well as risks related to limited control and limited rights to vote, potential conflicts of interest, cash flow, dilution, and limited liquidity, and risks related to the general partner s right to force sales at undesirable times or prices. MLPs are also subject to risks relating to their complex tax structure, including losing its tax status as a partnership, resulting in a reduction in the value of the MLP investment. Definitions and Indices Rate: The stated interest rate associated with a bond. GDP: The gross domestic product of a nation is the monetary value of all the finished goods and services produced within a country s borders in a specific time period. Inflation: The level of increase in prices and fall in the purchasing value of money. Market Interest Rate: The current prevailing interest for a bond of similar maturity and credit quality. Maturity is the average time to maturity for a bond. Yield-to-Maturity (YTM) reflects the internal annual rate of return an investor would realize by purchasing a bond, holding it to maturity, and reinvesting all coupon interest received at the same YTM. Another way to think about YTM is as the interest rate that will make the present value of the bond s cash flows equal to its purchase price. Bank Loans: Credit Suisse Leveraged Loan Index is unmanaged and represents the investable universe of the dollar-denominated leveraged loan market. Barclays U.S. Treasury Index represents the public obligations of the U.S. Treasury with a remaining maturity of one year or more. Global Real Estate: FTSE NAREIT All Equity REITs Index is an unmanaged index which measures the performance of all U.S. real estate investment trusts. Master Limited Partnerships (MLPs): Alerian MLP Index is a composite of the 50 most prominent energy MLPs that provides investors with an unbiased, comprehensive benchmark for this emerging asset class. The index is calculated using a float-adjusted, capitalization-weighted methodology. Non-Traditional s: Morningstar Non-Traditional Category contains funds that pursue strategies divergent in one or more ways from conventional practice in the broader bond-fund universe. Short Duration High Income Municipal s: Barclays Short Duration Muni 50% HG / 50% HY Index Barclays Short Duration Muni 50% HG / 50% HY Index consists of the Barclays Municipal 1 8 Year Index (50%), which is an unmanaged index that includes all benchmark-eligible, investment-grade municipal bonds with maturities from 1 to 8 years, and the Barclays Municipal High Yield 1 8 Year Index (50%), which is an unmanaged index that includes all benchmarkeligible, Ba1 or lower rated and non-rated municipal bonds with maturities from 1 to 8 years. Short Duration High Yield s: Barclays BB/B 1 5 Year 1% Constrained High Yield Index is an unmanaged index that covers the universe of fixed rate, non-investment-grade debt. Issuers are capped at 1% of the Index. Index holdings must have at least one year to final maturity, at least $150 million par amount outstanding, and be publicly issued with a rating of Ba1 or lower and maturities from one to five years. Short-Term Corporate s: Barclays 1 5 Year U.S. Credit Index is an unmanaged index of publicly issued U.S. corporate and specified foreign debentures and secured notes that meet specific maturity (between one and five years), liquidity, and quality requirements. It gives a broad look at how short- and intermediate-term bonds have performed. Indices are unmanaged, and an investment cannot be made directly into an index. 10 CHANGING INTEREST RATES

11

12 ABOUT PRUDENTIAL INVESTMENTS Prudential Investments is dedicated to helping you solve your toughest investment challenges whether it s capital growth, reliable income, or protection from market volatility and other risks. Through ever-changing markets, we strive to be a leader in a broad range of investments to help you stay on course to the future you envision. Our investment professionals also manage money for major corporations and pension funds around the world, which means you benefit from the same expertise, innovation, and attention to risk demanded by today s most sophisticated investors. Together they manage more than $963 billion in assets (through 12/31/2015). We believe the knowledge and experience of a financial professional provides a valuable advantage, so we make our products available through financial advisors. We are part of Prudential Financial, a company America has been bringing its challenges to for 140 years. Bring us yours. FOR MORE INFORMATION, contact your financial professional or visit our website at prudentialfunds.com. Consider a fund s investment objectives, risks, charges, and expenses carefully before investing. The prospectus and summary prospectus contain this and other information about the fund. Contact your financial professional for a prospectus and summary prospectus. Read them carefully before investing. Mutual funds are distributed by Prudential Investment Management Services LLC, a Prudential Financial company, member SIPC Prudential Financial, Inc. and its related entities. The Prudential logo and the Rock symbol are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide. MUTUAL FUNDS Are not insured by the FDIC or any federal government agency May lose value Are not a deposit of or guaranteed by any bank or any bank affiliate PI4128 Expiration: 02/28/2017

PRUDENTIAL INVESTMENTS» MUTUAL FUNDS RETHINKING THE ROLE OF INCOME INVESTING THE FOUR WAYS INCOME INVESTMENTS CAN HELP YOU MEET YOUR FINANCIAL GOALS

PRUDENTIAL INVESTMENTS» MUTUAL FUNDS RETHINKING THE ROLE OF INCOME INVESTING THE FOUR WAYS INCOME INVESTMENTS CAN HELP YOU MEET YOUR FINANCIAL GOALS PRUDENTIAL INVESTMENTS» MUTUAL FUNDS RETHINKING THE ROLE OF INCOME INVESTING THE FOUR WAYS INCOME INVESTMENTS CAN HELP YOU MEET YOUR FINANCIAL GOALS YOU PLAY MANY ROLES. INCOME INVESTMENTS DO TOO. If

More information

Deutsche Alternative Asset Allocation VIP

Deutsche Alternative Asset Allocation VIP Alternative Deutsche Alternative Asset Allocation VIP All-in-one exposure to alternative asset classes : a key piece in asset allocation Building a portfolio of stocks, bonds and cash has long been recognized

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

Transamerica MLP & Energy Income

Transamerica MLP & Energy Income Alternative Investments Transamerica MLP & Energy Income A comprehensive approach to infrastructure investing Portfolio managed by Kayne Anderson Capital Advisors, L.P. Transamerica Funds are advised by

More information

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

Fixed Income 2015 Update. Kathy Jones, Senior Vice President Chief Fixed Income Strategist, Schwab Center for Financial Research

Fixed Income 2015 Update. Kathy Jones, Senior Vice President Chief Fixed Income Strategist, Schwab Center for Financial Research Fixed Income 2015 Update Kathy Jones, Senior Vice President Chief Fixed Income Strategist, Schwab Center for Financial Research 1 Fed: Slow and Low 2015 Fixed Income Outlook 2 Yield Curve Flattening 3

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

Capital preservation strategy update

Capital preservation strategy update Client Education Summit 2012 Capital preservation strategy update Head of Institutional Fixed Income Investments, Americas October 9, 2012 Topics for discussion 1 Capital preservation strategies 2 3 4

More information

30% 5% of fixed income mutual funds paid capital gains in 2015

30% 5% of fixed income mutual funds paid capital gains in 2015 FIXED INCOME ETFs: NEW ASSET CLASS, SAME BENEFITS Exchange Traded Funds ( ETFs ) first appealed to equity investors, providing efficient access to the world s stock markets and they have revolutionized

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

PROTECTING YOUR PORTFOLIO WITH BONDS

PROTECTING YOUR PORTFOLIO WITH BONDS Your Global Investment Authority PROTECTING YOUR PORTFOLIO WITH BONDS Bond strategies for an evolving market Market uncertainty has left many investors wondering how to protect their portfolios during

More information

Deutsche Floating Rate Fund

Deutsche Floating Rate Fund Taxable Fixed-Income 2 nd quarter 2014 Deutsche Floating Rate Fund Access a world of opportunities through the global resources of Deutsche Bank Canada United States Netherlands Belgium United Kingdom

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

INSIGHTS ON INVESTING IN COMMODITIES

INSIGHTS ON INVESTING IN COMMODITIES PRUDENTIAL INVESTMENTS» MUTUAL FUNDS INSIGHTS ON INVESTING IN COMMODITIES WHITE PAPER NATURAL RESOURCES STOCKS HOLD THE LONG-TERM EDGE Although commodities may benefit an investment portfolio by offering

More information

Structured Products. Designing a modern portfolio

Structured Products. Designing a modern portfolio ab Structured Products Designing a modern portfolio Achieving your personal goals is the driving motivation for how and why you invest. Whether your goal is to grow and preserve wealth, save for your children

More information

A portfolio that matches your plans.

A portfolio that matches your plans. A portfolio that matches your plans. Amerivest Core Portfolios powered by Morningstar Associates Expert investment management Tailored portfolio recommendations Straightforward, competitive pricing Dedicated

More information

TAXES AND YOUR PORTFOLIO: It s not what you earn, it s what you keep

TAXES AND YOUR PORTFOLIO: It s not what you earn, it s what you keep TAXES AND YOUR PORTFOLIO: It s not what you earn, it s what you keep YOUR HOST John Sweeney Executive Vice President, Retirement & Investing Strategies, Fidelity Investments 2 JOIN THE CONVERSATION: @SweeneyFidelity

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

Finding Income in a Low Rate World

Finding Income in a Low Rate World Finding in a Low Rate World Executive Summary Historically low interest rates have left investors starved for income. Investors who want higher income may be willing to diversify but aren t sure how to

More information

Fixed Income: The Hidden Risk of Indexing

Fixed Income: The Hidden Risk of Indexing MANNING & NAPIER ADVISORS, INC. Fixed Income: The Hidden Risk of Indexing Unless otherwise noted, all figures are based in USD. Fixed income markets in the U.S. are vast. At roughly twice the size of domestic

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

MERCER PORTFOLIO SERVICE MONTHLY REPORT

MERCER PORTFOLIO SERVICE MONTHLY REPORT MERCER PORTFOLIO SERVICE MONTHLY REPORT MAY 206 Mercer Superannuation (Australia) Limited ABN 79 004 77 533 Australian Financial Services Licence # 235906 is the trustee of the Mercer Portfolio Service

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

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

Franklin Tax-Free Income Funds

Franklin Tax-Free Income Funds Tax-Free Income Franklin Tax-Free Income Funds INVEST WITH A TAX-FREE LEADER Franklin Templeton Investments Gain From Our Perspective At Franklin Templeton Investments, we re dedicated to one goal: delivering

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

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

How Hedging Can Substantially Reduce Foreign Stock Currency Risk

How Hedging Can Substantially Reduce Foreign Stock Currency Risk Possible losses from changes in currency exchange rates are a risk of investing unhedged in foreign stocks. While a stock may perform well on the London Stock Exchange, if the British pound declines against

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

T HE H ARTFORD F LOATING R ATE F UND Helping Investors Prepare for Rising Interest Rates

T HE H ARTFORD F LOATING R ATE F UND Helping Investors Prepare for Rising Interest Rates T HE H ARTFORD F LOATING R ATE F UND Helping Investors Prepare for Rising Interest Rates Michael J. Bacevich Portfolio Manager The Hartford Floating Rate Fund John P. Connor Portfolio Manager The Hartford

More information

Mutual Funds Made Simple. Brighten your future with investments

Mutual Funds Made Simple. Brighten your future with investments Mutual Funds Made Simple Brighten your future with investments About Invesco Aim When it comes to investing, your sights are set on a financial summit a college diploma, new home or secure retirement.

More information

Quarterly Asset Class Report Institutional Fixed Income

Quarterly Asset Class Report Institutional Fixed Income Quarterly Asset Class Report Institutional Presentation To: Presented By: canterburyconsulting.com September 30, 015 Role in the Canterbury Consulting recommends and communicates asset-class strategy with

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

YOUR FINANCIAL FUTURE

YOUR FINANCIAL FUTURE YOUR FINANCIAL FUTURE December 2014 In This Issue A Net Worth Statement Helps Keep Retirees on Track Your net worth is more than just your income. A net worth statement presents a composite picture "in

More information

INVESTING MADE SIMPLE

INVESTING MADE SIMPLE Investing Fundamentals INVESTING MADE SIMPLE AN EDUCATIONAL GUIDE FOR EVERY INVESTOR. INVEST WITH CONFIDENCE. HuntingtonFunds.com 1 1 Your Guide to the Basics of Investing Through Mutual Funds Mutual funds

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

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

Bond Market Insights October 10, 2014

Bond Market Insights October 10, 2014 Bond Market Insights October 10, 2014 by John Simms, CFA and Jerry Wiesner, CFA General Bond Market Treasury yields rose in September as prices fell. Yields in the belly of the curve (5- to 7-year maturities)

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

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

SFDCP TARGET DATE FUND PORTFOLIO SUMMARY: January 29, 2016

SFDCP TARGET DATE FUND PORTFOLIO SUMMARY: January 29, 2016 SFDCP TARGET DATE FUND PORTFOLIO SUMMARY: January 29, 2016 SFDCP Target Date Funds Overview SFDCP Target Date Funds (each, a Fund and collectively the Funds or the SFDCP Target Date Funds ) were developed

More information

GIPS List of Composite Descriptions. Perkins Composites...11. Fixed Income Composites... 14. Global Macro Composites...19. Alternative Composites...

GIPS List of Composite Descriptions. Perkins Composites...11. Fixed Income Composites... 14. Global Macro Composites...19. Alternative Composites... GIPS List of Composite Descriptions Updated 6/4/2015 Janus Equity Composites...2 Perkins Composites....11 Fixed Income Composites... 14 Global Macro Composites...19 Alternative Composites.....19 Allocation

More information

UNDERSTANDING PARTICIPATING WHOLE LIFE INSURANCE

UNDERSTANDING PARTICIPATING WHOLE LIFE INSURANCE UNDERSTANDING PARTICIPATING WHOLE LIFE INSURANCE equimax CLIENT GUIDE ABOUT EQUITABLE LIFE OF CANADA Equitable Life is one of Canada s largest mutual life insurance companies. For generations we ve provided

More information

Fixed Income Asset Allocation

Fixed Income Asset Allocation Fixed Income Asset Allocation j a n n e y fixed income strat e g y While 2015 finished off with big spread widening in high yield, strong performance of our favorite sector, munis, overwhelmed losses in

More information

What Investors Should Know about Money Market Reforms

What Investors Should Know about Money Market Reforms What Investors Should Know about Money Market Reforms What Investors Should Know about Money Market Reforms Executive Summary Ò New SEC regulations for the $2.7 trillion money market industry may present

More information

3Q14. Are Unconstrained Bond Funds a Substitute for Core Bonds? August 2014. Executive Summary. Introduction

3Q14. Are Unconstrained Bond Funds a Substitute for Core Bonds? August 2014. Executive Summary. Introduction 3Q14 TOPICS OF INTEREST Are Unconstrained Bond Funds a Substitute for Core Bonds? August 2014 Executive Summary PETER WILAMOSKI, PH.D. Director of Economic Research Proponents of unconstrained bond funds

More information

Interest Rate Options

Interest Rate Options Interest Rate Options A discussion of how investors can help control interest rate exposure and make the most of the interest rate market. The Chicago Board Options Exchange (CBOE) is the world s largest

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

Parsing Puerto Rico. July 24, 2015 by Anthony Valeri of LPL Financial

Parsing Puerto Rico. July 24, 2015 by Anthony Valeri of LPL Financial Parsing Puerto Rico July 24, 2015 by Anthony Valeri of LPL Financial KEY TAKEAWAYS Puerto Rico s debt crisis remains isolated and not symptomatic of the broad municipal bond market. Signs of contagion

More information

WESTERN ASSET INSTITUTIONAL CASH RESERVES

WESTERN ASSET INSTITUTIONAL CASH RESERVES Annual Report August 31, 2015 WESTERN ASSET INSTITUTIONAL CASH RESERVES INVESTMENT PRODUCTS: NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE Fund objective The Fund s investment objective is to provide

More information

A guide to investing in unit investment trusts

A guide to investing in unit investment trusts A guide to investing in unit investment trusts What you should know before you buy Wells Fargo Advisors wants to ensure that you are investing in the products that best suit your financial situation, investment

More information

Annual Management Report of Fund Performance. Management Discussion of Fund Performance. Mawer Canadian Bond Fund. Results of Operations

Annual Management Report of Fund Performance. Management Discussion of Fund Performance. Mawer Canadian Bond Fund. Results of Operations Annual Management Report of Fund Performance For the Year Ended December 31, 2014 This annual management report of fund performance contains financial highlights but does not contain the complete annual

More information

FORECAST. Economic and market. Economy. U.S. equities. Fixed income. International and commodities. Alternatives

FORECAST. Economic and market. Economy. U.S. equities. Fixed income. International and commodities. Alternatives November 2014 Economic and market FORECAST A monthly report by our Advisory Services Group Economy The U.S. economy has been slowly improving over the past few years. Nevertheless, voters seemed to be

More information

REIT QUICK FACTS GUIDE

REIT QUICK FACTS GUIDE REIT QUICK FACTS GUIDE FOR FINANCIAL ADVISORS Guidelines for Strategic Portfolio Diversification FINRA-Reviewed Fact Sheets on Stock Exchange-Listed Equity REITs Additional References for Advisors THERE

More information

Glossary of Investment Terms

Glossary of Investment Terms online report consulting group Glossary of Investment Terms glossary of terms actively managed investment Relies on the expertise of a portfolio manager to choose the investment s holdings in an attempt

More information

The Dividend Signal. Uncovering Global Growth Opportunities

The Dividend Signal. Uncovering Global Growth Opportunities March 2016 The Dividend Signal Uncovering Global Growth Opportunities By David L. Ruff, CFA, Senior Portfolio Manager, Salient Dividend Signal Strategy Team Contrary to their reputation, actively managed

More information

STATEMENT OF POLICY AND INVESTMENT OBJECTIVES. The University of North Carolina at Pembroke Endowment Board. and

STATEMENT OF POLICY AND INVESTMENT OBJECTIVES. The University of North Carolina at Pembroke Endowment Board. and STATEMENT OF POLICY AND INVESTMENT OBJECTIVES The University of North Carolina at Pembroke Endowment Board and The University of North Carolina at Pembroke Foundation, Inc. December 1, 2010 TABLE OF CONTENTS

More information

M&G Corporate Bond Fund

M&G Corporate Bond Fund Quarterly Review M&G Corporate Bond Fund Third quarter 2015 Fund manager Richard Woolnough Overview A general risk-off tone prevailed in the third quarter amid significant volatility in risk markets, driving

More information

The U.S. dollar continues to be a primary beneficiary during times of market stress. In our view:

The U.S. dollar continues to be a primary beneficiary during times of market stress. In our view: WisdomTree ETFs BLOOMBERG U.S. DOLLAR BULLISH FUND USDU Over the past few years, investors have become increasingly sophisticated. Not only do they understand the benefits of expanding their holdings beyond

More information

MUNICIPAL BOND PORTFOLIOS

MUNICIPAL BOND PORTFOLIOS Hepburn Capital Management, LLC 2069 Willow Creek Road Prescott, AZ 86301 928.778-4000 www.hepburncapital.com MUNICIPAL BOND PORTFOLIOS HOW WE DO IT This strategy moves from high yield to high quality

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

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

Midstream MLP Investing

Midstream MLP Investing GUIDE TO Midstream MLP Investing An exciting asset class for investors seeking diversification, growth and income. FRONTSTREETCAPITAL.COM Experts are projecting an unparalleled $640 billion to $900 billion

More information

Yield Curve September 2004

Yield Curve September 2004 Yield Curve Basics The yield curve, a graph that depicts the relationship between bond yields and maturities, is an important tool in fixed-income investing. Investors use the yield curve as a reference

More information

CHAPTER 7: FIXED-INCOME SECURITIES: PRICING AND TRADING

CHAPTER 7: FIXED-INCOME SECURITIES: PRICING AND TRADING CHAPTER 7: FIXED-INCOME SECURITIES: PRICING AND TRADING Topic One: Bond Pricing Principles 1. Present Value. A. The present-value calculation is used to estimate how much an investor should pay for a bond;

More information

A guide to investing in cash alternatives

A guide to investing in cash alternatives A guide to investing in cash alternatives What you should know before you buy Wells Fargo Advisors wants to help you invest in cash alternative products that are suitable for you based on your investment

More information

Optional Asset Allocation program for participants

Optional Asset Allocation program for participants Richard Gagne Retirement Security Education 0207662 What is GoalMaker? Optional Asset Allocation program for participants Uses professional asset allocation modeling based on portfolios created by Morningstar

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

Perspectives September

Perspectives September Perspectives September 2013 Quantitative Research Option Modeling for Leveraged Finance Part I Bjorn Flesaker Managing Director and Head of Quantitative Research Prudential Fixed Income Juan Suris Vice

More information

PRINCIPAL GLOBAL INVESTORS FUNDS. Supplement dated 31 July 2013. for the Long/Short Global Opportunities Equity Fund

PRINCIPAL GLOBAL INVESTORS FUNDS. Supplement dated 31 July 2013. for the Long/Short Global Opportunities Equity Fund PRINCIPAL GLOBAL INVESTORS FUNDS Supplement dated 31 July 2013 for the Long/Short Global Opportunities Equity Fund This Supplement contains specific information in relation to the Long/Short Global Opportunities

More information

Evergreen INSTITUTIONAL MONEY MARKET FUNDS. Prospectus July 1, 2009

Evergreen INSTITUTIONAL MONEY MARKET FUNDS. Prospectus July 1, 2009 Evergreen INSTITUTIONAL MONEY MARKET FUNDS Prospectus July 1, 2009 Evergreen Institutional 100% Treasury Money Market Fund Evergreen Institutional Money Market Fund Evergreen Institutional Municipal Money

More information

SPDR EURO STOXX 50 ETF

SPDR EURO STOXX 50 ETF FEZ (NYSE Ticker) Summary Prospectus-January 31, 2016 Before you invest in the SPDR EURO STOXX 50 ETF (the Fund ), you may want to review the Fund's prospectus and statement of additional information,

More information

Federated High Income Bond Fund II

Federated High Income Bond Fund II Summary Prospectus April 30, 2016 Share Class Primary Federated High Income Bond Fund II A Portfolio of Federated Insurance Series Before you invest, you may want to review the Fund s Prospectus, which

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

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

ANNUITIES VARIABLE. MetLife Retirement Perspectives. asset allocation questionnaire

ANNUITIES VARIABLE. MetLife Retirement Perspectives. asset allocation questionnaire LINE BAN ANNUITIES VARIABLE MetLife Retirement Perspectives asset allocation questionnaire Asset Allocation Questionnaire The following questions will enable you to determine your time horizon and risk

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

Delaware Investments Global Real Estate Securities. Citywire Wealth Management Forum. Presented by:

Delaware Investments Global Real Estate Securities. Citywire Wealth Management Forum. Presented by: Delaware Investments Global Real Estate Securities Citywire Wealth Management Forum Presented by: Bob Zenouzi Senior Vice President Senior Portfolio Manager July 1, 2009 Delaware Investments is the marketing

More information

SAMPLE CLIENT QUARTERLY REPORT 6789 MAIN STREET SUITE 100 CHICAGO, IL 54321

SAMPLE CLIENT QUARTERLY REPORT 6789 MAIN STREET SUITE 100 CHICAGO, IL 54321 SAMPLE CLIENT QUARTERLY REPORT 6789 MAIN STREET SUITE 100 CHICAGO, IL 54321 Notice to Investors Regarding Custodian Account Statements: You are encouraged to read the statements you receive from the custodian

More information

An Alternative Way to Diversify an Income Strategy

An Alternative Way to Diversify an Income Strategy Senior Secured Loans An Alternative Way to Diversify an Income Strategy Alternative Thinking Series There is no shortage of uncertainty and risk facing today s investor. From high unemployment and depressed

More information

Important Information about Real Estate Investment Trusts (REITs)

Important Information about Real Estate Investment Trusts (REITs) Robert W. Baird & Co. Incorporated Important Information about Real Estate Investment Trusts (REITs) Baird has prepared this document to help you understand the characteristics and risks associated with

More information

Investment Offerings

Investment Offerings CHURCH OF THE BRETHREN PENSION PLAN Investment Offerings (Addendum to Participants Handbook) 1505 Dundee Ave. Elgin, IL 60120 800-746-1505 www.bbtpension.org 1 Dear Plan member, Brethren Pension Plan is

More information

Your advisor worth more than 1%?

Your advisor worth more than 1%? Your advisor worth more than 1%? APRIL 2016 Q: What will I get for the fee I m paying? Saving for retirement. Sending a child to college. Buying your dream home. Achieving these goals may take more than

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

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

Funds in Court Information Guide INVESTMENT RISKS

Funds in Court Information Guide INVESTMENT RISKS Funds in Court Information Guide INVESTMENT RISKS NOTE: The information in this document is for information purposes only. The information is not intended to be and does not constitute financial advice

More information

Investing in Bond Funds:

Investing in Bond Funds: : What s in YOUR bond fund? By: Bruce A. Hyde and Steven Saunders Summary Investors who rely primarily on duration in choosing a bond fund may inadvertently introduce extension risk to their bond portfolio.

More information

PRINCIPAL ASSET ALLOCATION QUESTIONNAIRES

PRINCIPAL ASSET ALLOCATION QUESTIONNAIRES PRINCIPAL ASSET ALLOCATION QUESTIONNAIRES FOR GROWTH OR INCOME INVESTORS ASSET ALLOCATION PRINCIPAL ASSET ALLOCATION FOR GROWTH OR INCOME INVESTORS Many ingredients go into the making of an effective investment

More information

Using Derivatives in the Fixed Income Markets

Using Derivatives in the Fixed Income Markets Using Derivatives in the Fixed Income Markets A White Paper by Manning & Napier www.manning-napier.com Unless otherwise noted, all figures are based in USD. 1 Introduction While derivatives may have a

More information

Putnam Stable Value Fund

Putnam Stable Value Fund Putnam Stable Value Fund Offering Statement 3 15 16 Goal 2 What is Putnam Stable Value Fund? 2 Investment strategy 2 Risks of the Fund 5 Eligibility 6 Fund provisions 7 Fees and Expenses 9 Putnam Fiduciary

More information

Obligation-based Asset Allocation for Public Pension Plans

Obligation-based Asset Allocation for Public Pension Plans Obligation-based Asset Allocation for Public Pension Plans Market Commentary July 2015 PUBLIC PENSION PLANS HAVE a single objective to provide income for a secure retirement for their members. Once the

More information

STATE OF NORTH CAROLINA INTRODUCTION TO STABLE VALUE

STATE OF NORTH CAROLINA INTRODUCTION TO STABLE VALUE STATE OF NORTH CAROLINA INTRODUCTION TO STABLE VALUE SECTION I: APPENDIX: Introduction to Stable Value Professional Biographies William Weber Senior Director 612.667.6401 william.l.weber@galliard.com A

More information

Mawer Canadian Bond Fund. Interim Management Report of Fund Performance

Mawer Canadian Bond Fund. Interim Management Report of Fund Performance Interim Management Report of Fund Performance For the Period Ended June 30, 2015 This interim management report of fund performance contains financial highlights but does not contain either interim or

More information

SmartRetirement Mutual Fund Commentary

SmartRetirement Mutual Fund Commentary SmartRetirement Mutual Fund Commentary J.P.Morgan Asset Management 3 rd Quarter 2014 Performance Highlights SmartRetirement s Performance Objectives The JPMorgan SmartRetirement Mutual Funds are designed

More information

The timeless (and timely) case for high-yield bonds

The timeless (and timely) case for high-yield bonds EATON VANCE TOPIC PAPER MAY 2016 The timeless (and timely) case for high-yield bonds Michael Weilheimer, CFA Director High-Yield Investments Steve Concannon Portfolio Manager High-Yield Investments Jeff

More information

JPMorgan Funds statistics report: High Yield Fund

JPMorgan Funds statistics report: High Yield Fund NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE JPMorgan s statistics report: High Yield Must be preceded or accompanied by a prospectus. jpmorganfunds.com Table of contents PERFORMANCE DURATION Performance

More information

AN INTRODUCTION TO PORTFOLIO DIVERSIFICATION USING ALTERNATIVE INVESTMENTS

AN INTRODUCTION TO PORTFOLIO DIVERSIFICATION USING ALTERNATIVE INVESTMENTS ALTEGRIS ACADEMY FUNDAMENTALS AN INTRODUCTION TO PORTFOLIO DIVERSIFICATION USING ALTERNATIVE INVESTMENTS [1] The key elements of diversification. Most, if not all, investors have been told the virtues

More information

Schwab Target Funds. Go paperless today. Simplify your financial life by viewing these documents online. Sign up at schwab.

Schwab Target Funds. Go paperless today. Simplify your financial life by viewing these documents online. Sign up at schwab. Annual report dated October 31, 2015, enclosed. Schwab Target Funds Schwab Target 2010 Fund Schwab Target 2015 Fund Schwab Target 2020 Fund Schwab Target 2025 Fund Schwab Target 2030 Fund Schwab Target

More information