High Yield Credit: An Evaluation for Prospective Insurance Company Investors
|
|
- Marvin Riley
- 8 years ago
- Views:
Transcription
1 High Yield Credit: An Evaluation for Prospective Insurance Company Investors Low interest rates challenging traditional insurance company business model More insurance companies using high yield to mitigate book yield decline Higher quality credits less prone to price volatility and write-downs Credit fundamentals supportive of current valuations Bank loans offer attractive relative value versus high yield bonds According to the Federal Reserve, U.S. insurance companies hold approximately $6.5 trillion of financial assets, a significant majority invested in traditional fixed income assets and mortgage loans. 1 As the thirty year bond bull market continues with 10-year U.S. Treasury notes yielding a paltry 1.75% (as of 6/30/12) and investment grade corporate bond spreads compressing versus Treasuries, insurers are seeing a slow but steady erosion of book yield from their investment portfolios. Moreover, benign inflation forecasts and an accommodative Fed point to a likely extended period of low rates further stressing portfolio yields. Much like the recent soft market in the property & casualty industry, insurers today are accepting lower rates (this time, return on invested assets) for the same set of risks previously assumed. As a result, the thoughtful evaluation of duration, liquidity, and credit risk by insurance companies and their investment managers is of increasing importance in today s climate. In this article we will focus our attention on credit risk, specifically evaluating the complementary role that an allocation to high yield corporate bonds adds to an insurance company s core investment grade fixed income portfolio. An analysis of statutory financial transaction data indicates the severity of the yield decline in new money rates experienced by the industry (Exhibits 1 and 2). A sample of mid-sized property & casualty carriers purchased corporate bonds during the first half of 2012 at an average yield of 3.1%, a decline from nearly 5.75% during Similarly, corporate bond purchases made by a sample group of life insurance companies averaged 4.9% during the first half of 2012, a decline from 6.1% during Credit spreads have continued to narrow throughout the third quarter, pushing purchase yields to even lower levels. 1 Federal Reserve Flow of Funds Accounts of the United States: Flows and Outstandings, Second Quarter 2012, September 20, 2012, page 31. NOVEMBER 2012
2 Exhibit 1: Investment Grade Corporate Bond Yields Currently Below 3.0% Will Continue To Pressure Industry Book Yields P&C Company Avg. Bond Yield Life Company Avg. Bond Yield Barclays Corporate Bond Yield Yield (%) Source: SNL Financial, Inc., Barclays Capital Exhibit 2: New Money Yields Have Fallen Consistently, the Result of Declining Treasury Yields and Narrowing Risk Premiums Source: SNL Financial, Inc. Note: Based on purchase data from 15 randomly chosen Life and P&C insurers with assets between $100 million and $2 billion. Includes only corporate bond purchases with bullet maturities. NOVEMBER
3 Despite a challenging trend, insurance companies willing and able to expand their opportunity set to include high yield corporate bonds and bank loans can mitigate a portion of the impact of low prevailing interest rates (Exhibit 3). While spreads and yields have compressed, below investment grade rated assets remain even at current levels one of the few sources of yield without sacrificing liquidity, with the U.S. broad market yielding approximately 6.5%. Exhibit 3: High Yield Credit Remains a Compelling Income Proposition Relative to High Grade Alternatives Source: BoA ML indices. All figures are yield to worst. As of September 30, In a portfolio setting, historical returns and correlations suggest that non-investment grade bonds offer diversification benefits and can increase expected return while modestly reducing portfolio volatility (Exhibit 4). Looking back to 1992, an investment grade portfolio (as measured by the Barclays Capital Aggregate Bond Index) has returned an average of 6.4% annually with approximately 3.7% annualized volatility. That high grade portfolio, when blended with 10% BB/B exposure averaged annual returns of 6.6% with slightly lower volatility. For the same level of volatility as the Aggregate Index portfolio, a 20% allocation to the BB/B portfolio would have returned 6.8% annually over the 20 year time period evaluated. NOVEMBER
4 Exhibit 4: Historical Returns (12/31/1992 to 9/30/2012) Suggest an Incremental Allocation to High Yield Improves the Return Profile with a Modest Reduction in Volatility 8.5% 8.0% 8.01% Average Annualized Return 7.5% 7.0% 6.5% 6.41% 6.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% Annualized Standard Deviation of Returns Source: Barclays index series data. Incrementally adds high yield to high grade (Barclays Capital BB-B Index, 2% Issuer Cap and Barclays Capital Aggregate bond index). Insurance Company Exposure and Risk/Regulatory Considerations Filing data provides evidence that insurers are attracted to the high yield market by the yield benefits and return potential as described above. Not surprisingly, investment activity differs based on industry and insurance company size. Larger property & casualty companies are more likely to have a measureable allocation to below investment grade rated securities, and those companies are more heavily invested in the sector than their smaller peers (Exhibit 5). What is consistent among P&C companies regardless of size is the increasing frequency and weighting to non-investment grade bonds since Interestingly across all mid-sized P&C companies, while roughly 20% reported a measureable allocation to high yield, nearly 80% of these same companies had an allocation to non-affiliated common stocks (with an average of approximately 10.5% of invested assets in equities). We believe that P&C insurers should take a balanced approach to risk assets and consider the role of both equities and high yield in an investment portfolio context. NOVEMBER
5 Exhibit 5: Property & Casualty Company Invested Asset History ( ) Invested Assets: $100 - $500 million % of Companies with High Yield Avg. High Yield Exposure (% of bonds) % of Companies with Equity Avg. Equity Exposure (% of Invested Assets) % 5.45% 73.45% 12.61% % 4.78% 73.57% 12.91% % 4.75% 73.91% 13.20% % 4.78% 69.36% 14.46% % 4.82% 70.17% 13.55% % 4.44% 72.27% 10.11% % 4.86% 71.55% 11.32% % 5.07% 73.64% 11.80% % 5.50% 75.21% 11.72% Source: SNL Financial, Inc. Measureable sub-investment grade exposure defined as > 2% of fixed income investments. A greater reliance on yield and more favorable accounting treatment likely explain a more frequent use of high yield among life insurance companies roughly 50% of life companies with assets of $100 million - $2 billion have a measureable allocation to non-investment grade bonds with an average weighting of approximately 6% of bond investments (Exhibit 6). Filing data suggests that life companies, like their P&C peers, have modestly increased exposure to the sector relative to precrisis levels. Moreover, those yield and regulatory considerations are a cause for life insurance companies limited investment in common stocks. Exhibit 6: Life Insurance Company Invested Asset History ( ) Invested Assets: $100 - $500 million Invested Assets: $500 million - $2 billion % of Companies with High Yield Avg. High Yield Exposure (% of bonds) % of Companies with High Yield Avg. High Yield Exposure (% of bonds) % 5.84% 56.14% 5.83% % 8.19% 38.60% 5.27% % 7.93% 45.61% 4.50% % 7.75% 38.60% 4.84% % 7.23% 38.60% 4.83% % 6.77% 49.12% 5.30% % 6.62% 54.39% 6.33% % 7.18% 56.14% 5.38% % 6.26% 50.88% 5.52% Source: SNL Financial, Inc. Measureable sub-investment grade exposure defined as > 2% of fixed income investments. Life insurance companies carry debt investments at amortized cost, except for those considered to be at or near default (NAIC 6 rated investments). Absent credit events, a life insurance investor will realize the income statement benefit of high yield with virtually no statutory balance sheet NOVEMBER
6 volatility. However, where accounting treatment accommodates high yield credit, regulatory risk based capital requirements and rating agency treatment (Best s Capital Adequacy Requirement) are more punitive and quality biased and should be contemplated. Moreover, balance sheet leverage is typically elevated in the life insurance industry placing a greater importance on asset quality and loss avoidance. Statutory accounting treatment for property & casualty companies is more stringent with all speculative grade rated debt investments (NAIC 3 or below) carried at lower of cost or market value much like equity investments. Whereas life insurance companies reap the benefits of higher investment income with limited balance sheet risk, property & casualty companies will realize price volatility through surplus, rewarding those investors that can control downside risk. These factors suggest a risk budgeting approach to high yield credit viewing the appropriate allocation in the construct of surplus at risk, similar to the approach taken with equity investments. The NAIC has not written authoritative guidance on the treatment of bank loans for statutory accounting purposes. Should an insurance company categorize these investments as bonds under SSAP 26, similar rating related implications as described above are pertinent. Alternatively, if an insurance investor treats bank loans as Schedule BA other invested assets, capital requirements are increased and mark-to-market risk emerges for life companies (Exhibit 7). We are aware of insurance companies using both interpretations of guidance for the asset class. To alleviate the capital pressure, loan-level price volatility, and accounting burden, we have seen a trend towards utilization vehicles which are rated by the NAIC and thus subject to reduced RBC for life insurance investors. A Moody s analysis of historical default experience since 1920 shows a peak one-year default rate for speculative grade rated companies of 15.6% in 1933 with the recent 2009 default rate of 13.1% a close second. However experience by issuer quality varied greatly during both periods. Over the measurement period, BB rated issuers defaulted at an average 1.07% rate, B rated issuers at a 3.4% rate, while those CCC or below averaged a 13.8% default rate. Looking ahead, while base case speculative grade default rates are expected to be below average at around 3%, stress case default estimates are upwards of 8%. 2 We believe that historical and projected default costs coupled with heavier capital requirements for NAIC 5 and 6 rated investments support an upper-tier high yield bias for insurance company investors. 2 Moody's Global Credit Research: "Annual Default Study: Corporate Default and Recovery Rates, ," Feb 29, 2012, Annual_Default_Study_Corporate_Default_and_Recovery_Rates_1920_2011-PBC_ NOVEMBER
7 Exhibit 7: Regulatory and Rating Agency Capital Requirements by Investment Type Unaffiliated Asset Type P&C RBC P&C BCAR Life RBC Life BCAR #1 Highest Quality 0.30% 1.00% 0.40% 0.80% #2 High Quality 1.00% 2.00% 1.30% 2.50% #3 Medium Quality 2.00% 4.00% 4.60% 6.00% #4 Low Quality 4.50% 4.50% 10.00% 12.00% #5 Lower Quality 10.00% 10.00% 23.00% 25.00% #6 In or near Default 30.00% 30.00% 30.00% 37.50% Common Stocks 15.00% 15.00% >22.5% 30.00% Other Invested Assets 20.00% 20.00% 30.0% or Rating Source: NAIC and A.M. Best >36.0% AAM s Partnership with Muzinich & Co. In our over thirty years of providing investment management expertise to the insurance industry, we understand that insurance companies seek a high level of risk-adjusted income with a constant focus on the avoidance of realized credit losses. These objectives, coupled with the insurance regulatory framework, led us to partner with Muzinich & Company to offer quality high yield bond portfolios and bank loans to the insurance industry. With assets under management in excess of $17 billion and a deep team of supporting credit analysts, Muzinich s approach to managing high yield credit is well suited to meet the needs of the insurance industry: BB/B focused portfolios Low historical annualized default rate a fraction of the high yield market default rate Rigorous fundamental credit evaluation Ability to tactically rotate between the bond and loan market Outlook includes consideration of high yield indicators The High Yield Market Outlook Credit fundamentals within the high yield market are stable today and significantly improved from pre-crisis levels as companies have been diligently focused on strengthening balance sheets. This means aggressively reducing debt, pushing out maturities and increasing cash balances (Exhibit 8). Net leverage has declined to below trend levels, interest coverage ratios have increased to above historical averages and the majority of new issuance has been utilized for refinancing. The resulting backdrop creates a marketplace with limited refinancing needs prior to NOVEMBER
8 Exhibit 8: The Debt Maturity Wall Has Been Pushed Out by Recently Heavy Issuance Source: JP Morgan, Market. As of June 2012 We are generally comfortable with credit risk, particularly with the BB/B names within our client portfolios. However, the last five years have most certainly been dominated by increased tail risk as demonstrated in Exhibit 9. The red line highlights returns since 2007 while the blue line highlights returns from 1991 to The tails have clearly become fatter in the last 5 years. Exhibit 9: High Yield Returns Have Exhibited More Volatility Compared to Pre-Crisis Monthly Return Distribution for US HY Cash Pay 1991 to 2007 vs. US HY Cash Pay Last Five Years (through July 31, 2012) US HY Cash Pay 1991 to 2007 US HY Cash Pay since 2007 Fatter Tail 20% 15% 10% 5% 0% 5% 10% 15% 20% Monthly Returns Source: BofA ML US High Yield Cash Pay Index (J0A0) NOVEMBER
9 While tail risk certainly persists, pull-backs in the high yield market have been markedly shallower and shorter since 2009 with no two consecutive negative months (one exception being August and September 2011). We would attribute these more modest pull-backs to improving credit trends, low default rates, and investors understanding that company fundamentals remain sound. As such, we have found that pull-backs have represented attractive buying opportunities for investors. For investors considering an allocation to high yield credit, we cannot stress enough the importance of coupon income (book yield). Returns for high yield bonds are generated by two components: income generation and capital appreciation. High yield bonds generate a steady stream of income based on a contractual obligation to pay the stated coupon, assuming no defaults. Over time, most returns in the high yield space are driven by the income generation component. Only a restructuring event or declaration of bankruptcy will terminate this obligation to pay the stated coupon and return of principal at maturity. From a coupon perspective, matters have not changed significantly over the last few years as the average coupon for the broad U.S. high yield market has ranged from 8.4% to 8.0% since the beginning of 2008 (Exhibit 10). Exhibit 10: High Yield Coupons Will Continue to Offer Compelling Carry for Investors BofA ML US High Yield Cash Pay (J0A0) Par Weighted Coupon and YTW 2008 to August 31, 2012 Coupons (%) Coupon YTW /1/2007 3/1/2008 6/1/2008 9/1/ /1/2008 3/1/2009 6/1/2009 9/1/ /1/2009 3/1/2010 6/1/2010 9/1/ /1/2010 3/1/2011 6/1/2011 9/1/ /1/2011 3/1/2012 6/1/2012 Yield to Worst (%) Source: BofA ML US High Yield Cash Pay Index (J0A0) Nevertheless, in the search for yield, high yield managers may be tempted to reach down in quality to CCC and distressed credits. We believe this is a risky strategy given the recent run in the market. Markets, while buoyant these last three months, remain highly sensitive to macro news, particularly events out of Europe. Tail risk remains high given the variety of negative currents that need to be navigated in a short period of time. A pull-back in the market could cause poorer quality credits, NOVEMBER
10 particularly those with refinancing needs, to suffer sharp declines. We believe it is important to invest in companies that can withstand economic hardship and respect their commitments to pay us our coupon and pay us back at maturity. For tactically driven investors, we believe our bank loan strategy offers modestly better risk / return characteristics at current valuations. In summary, yields are lower now but spreads are still above their historic median. As we say often, we do not know if or when markets will correct it is very difficult to time markets. If markets do pull-back, we do not expect it to be significant given the strong underlying company fundamentals. When we compare the current environment to the previous 20 years, we are comfortable with our portfolios and believe our focus on risk management will continue to reward long-term investors. Written by: Timothy J. Senechalle, CFA Principal Vice President, Senior Portfolio Manager For more information, contact: Colin T. Dowdall, CFA, Director of Marketing and Business Development colin.dowdall@aamcompany.com 30 North LaSalle Street Suite 3500 Chicago, IL Disclaimer: Asset Allocation & Management Company, LLC (AAM) is an investment adviser registered with the Securities and Exchange Commission, specializing in fixed-income asset management services for insurance companies. This information was developed using publicly available information, internally developed data and outside sources believed to be reliable. While all reasonable care has been taken to ensure that the facts stated and the opinions given are accurate, complete and reasonable, liability is expressly disclaimed by AAM and any affiliates (collectively known as AAM ), and their representative officers and employees. This report has been prepared for informational purposes only and does not purport to represent a complete analysis of any security, company or industry discussed. Any opinions and/or recommendations expressed are subject to change without notice and should be considered only as part of a diversified portfolio. A complete list of investment recommendations made during the past year is available upon request. Past performance is not an indication of future returns. This information is distributed to recipients including AAM, any of which may have acted on the basis of the information, or may have an ownership interest in securities to which the information relates. It may also be distributed to clients of AAM, as well as to other recipients with whom no such client relationship exists. Providing this information does not, in and of itself, constitute a recommendation by AAM, nor does it imply that the purchase or sale of any security is suitable for the recipient. Investing in the bond market is subject to certain risks including market, interest-rate, issuer, credit, inflation, liquidity, valuation, volatility, prepayment and extension. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. NOVEMBER
A case for high-yield bonds
By: Yoshie Phillips, CFA, Senior Research Analyst MAY 212 A case for high-yield bonds High-yield bonds have historically produced strong returns relative to those of other major asset classes, including
More informationThe Investment Opportunity in Convertible Bonds for Insurance Companies
The Investment Opportunity in Convertible Bonds for Insurance Companies The investment environment for insurance companies continues to be complex with many considerations weighing on investment allocation
More informationA case for high-yield bonds
By: Yoshie Phillips, CFA, Senior Research Analyst AUGUST 212 A case for high-yield bonds High-yield bonds have historically produced strong returns relative to those of other major asset classes, including
More informationThe case for high yield
The case for high yield Jennifer Ponce de Leon, Vice President, Senior Sector Leader Wendy Price, Director, Institutional Product Management We believe high yield is a compelling relative investment opportunity
More informationFixed-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 informationRisk 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 informationOpportunities 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 informationUpdated Fair Value Disclosures: SSAP No. 100 Fair Value Measurements
December 3, 2010 Updated Fair Value Disclosures: SSAP No. 100 Fair Value Measurements On Monday, November 29, 2010, the NAIC approved revisions to SSAP No. 100 Fair Value Measurements (SSAP 100). The new
More informationDesigning The Ideal Investment Policy Presented To The Actuaries Club of the Southwest & the Southeastern Actuarial Conference
Designing The Ideal Investment Policy Presented To The Actuaries Club of the Southwest & the Southeastern Actuarial Conference Presented by: Greg Curran, CFA & Michael Kelch, CFA AAM - Insurance Investment
More informationUnderstanding 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 informationCommercial Mortgage Loans: A Historically Attractive Asset Class for Insurance Investors
Commercial Mortgage Loans: A Historically Attractive Asset Class for Insurance Investors Commercial mortgage whole loans currently provide insurance investors with an attractive yield advantage to investment
More informationINSTITUTIONAL INVESTMENT & FIDUCIARY SERVICES: Building a Better Portfolio: The Case for High Yield Bonds
14\GBS\22\25062C.docx INSTITUTIONAL INVESTMENT & FIDUCIARY SERVICES: Building a Better Portfolio: The Case for High Yield Bonds By Adam Marks, Area Vice President and Jamia Canlas, Senior Analyst By looking
More informationRisks and Rewards in High Yield Bonds
Risks and Rewards in High Yield Bonds Peter R. Duffy, CFA, Partner, Senior Portfolio Manager Navy Yard Corporate Center, Three Crescent Drive, Suite 400, Philadelphia, PA 19112 www.penncapital.com 1 What
More informationGlobal 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 informationThe recent volatility of high-yield bonds: Spreads widen though fundamentals stay strong
Investment Insights The recent volatility of high-yield bonds: Spreads widen though fundamentals stay strong Kevin Lorenz, CFA, Managing Director, Lead Portfolio Manager of TIAA-CREF's High-Yield Fund
More informationBERYL Credit Pulse on High Yield Corporates
BERYL Credit Pulse on High Yield Corporates This paper will summarize Beryl Consulting 2010 outlook and hedge fund portfolio construction for the high yield corporate sector in light of the events of the
More informationDocumeent title on one or two. high-yield bonds. Executive summary. W Price (per $100 par) W. The diversification merits of high-yield bonds
April 01 TIAA-CREF Asset Management Documeent title on one or two The lines enduring Gustan case Book for pt high-yield bonds TIAA-CREF High-Yield Strategy Kevin Lorenz, CFA Managing Director Co-portfolio
More informationHigh 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 informationFLOATING 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 informationFLOATING 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 informationThe Search for Yield Continues: A Re-introduction to Bank Loans
INSIGHTS The Search for Yield Continues: A Re-introduction to Bank Loans 203.621.1700 2013, Rocaton Investment Advisors, LLC Executive Summary With the Federal Reserve pledging to stick to its zero interest-rate
More informationRethinking Fixed Income
Rethinking Fixed Income Challenging Conventional Wisdom May 2013 Risk. Reinsurance. Human Resources. Rethinking Fixed Income: Challenging Conventional Wisdom With US Treasury interest rates at, or near,
More informationSACRS Fall Conference 2013
SACRS Fall Conference 2013 Bank Loans November 14, 2013 Allan Martin, Partner What Are Floating Rate Bank Loans? Senior secured floating rate debt: Current Typical Terms: Spread: LIBOR + 5.00%-6.00% LIBOR
More informationWhy 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 informationLeveraged Loan Funds: Debunking the Myths
Leveraged Loan Funds: Debunking the Myths SM Leveraged Loan Funds: Debunking the Myths Contents 2 Myth #1: Managing liquidity in actively managed leveraged loan mutual funds is difficult. 3 Myth #2: In
More informationA Bail-In or a Bail-Out? New Risks on the Horizon in the Banking Sector
The US banking sector is currently characterized by good credit fundamentals and supportive technicals. A key risk offsetting this credit strength is the prospect of a new bank resolution regime (Orderly
More informationHolding 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 informationBonds, 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 informationSankaty Advisors, LLC
Leveraged Loans: A Primer December 2012 In today s market environment of low rates and slow growth, we believe that leveraged loans offer a unique diversification option for fixed income portfolios due
More informationFIXED 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 informationConvertibles: An investment solution for Insurance portfolios in challenging times
Convertibles: An investment solution for Insurance portfolios in challenging times By: Ravi Malik, CFA April 2013 Introduction In recent years the Federal Reserve has implemented unprecedented monetary
More informationCALVERT 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 informationBonds: A Solution for Yield-Starved Insurance Companies?
August 2015 A Solution for Yield-Starved Insurance Companies: Dividend Equities Federal Reserve efforts to normalize monetary policy are unlikely to provide meaningful relief for yield-starved insurance
More informationA leveraged. The Case for Leveraged Loans. Introduction - What is a Leveraged Loan?
PENN Capital Management The Navy Yard Corporate Center 3 Crescent Drive, Suite 400 Philadelphia, PA 19112 Phone: 215-302-1501 www.penncapital.com For more information: Christian Noyes, Senior Managing
More informationBond Market Perspectives
LPL FINANCIAL RESEARCH Bond Market Perspectives March 26, 2013 High-Yield Bonds and the Credit Cycle Anthony Valeri, CFA Market Strategist LPL Financial Highlights More speculative issuance has increased
More informationThe Credit Analysis Process: From In-Depth Company Research to Selecting the Right Instrument
Featured Solution May 2015 Your Global Investment Authority The Credit Analysis Process: From In-Depth Company Research to Selecting the Right Instrument In today s low yield environment, an active investment
More informationNPH 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 informationBlue Cross Plans: Tax Efficient Investing
With the expiring 833(b) tax deduction, the issue of taxability has entered the equation as a key consideration in the asset allocation process for many Blue Cross plans. Optimizing the allocation between
More informationState of the Industry
Attorney Advertising Prior results do not guarantee a similar outcome Models used are not clients but may be representative of clients 321 N. Clark Street, Suite 28, Chicago, IL 6654 312.832.45 State of
More informationA 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 informationKDP ASSET MANAGEMENT, INC.
ASSET MANAGEMENT, INC. High Yield Bond and Senior Secured Bank Loan Outlook March 2016 Asset Management, Inc. 24 Elm Street Montpelier, Vermont 802.223.0440 HighYield@kdpam.com The Case for High Yield
More informationMML Bay State Life Insurance Company Management s Discussion and Analysis Of the 2005 Financial Condition and Results of Operations
MML Bay State Life Insurance Company Management s Discussion and Analysis Of the 2005 Financial Condition and Results of Operations General Management s Discussion and Analysis of Financial Condition and
More informationEXECUTIVE SUMMARY. The commodity related sectors of Energy and Metals & Mining suffered the most damage.
HIGH YIELD MARKET UPDATE May 2016 Christopher C. Langs, CFA Vice President Taxable Bond Portfolio Manager EXECUTIVE SUMMARY The severe commodity selloff that began in late 2014 has had a profound impact
More informationDocumeent title on one or two. high-yield bonds. Executive summary. W Price (per $100 par) W Yield to worst 110
April 2014 TIAA-CREF Asset Management Documeent title on one or two The lines enduring Gustan case Book for 24pt high-yield bonds TIAA-CREF High-Yield Strategy Kevin Lorenz, CFA Managing Director Portfolio
More informationBond 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 informationQuarterly 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 informationTaxable 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 informationIn 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 informationDocumeent title on one or two. high-yield bonds. Executive summary. W Price (per $100 par) W Yield to worst 110
May 2015 TIAA-CREF Asset Management Documeent title on one or two The lines enduring Gustan case Book for 24pt high-yield bonds TIAA-CREF High-Yield Strategy Kevin Lorenz, CFA Managing Director Portfolio
More information2013 GSAM Insurance Survey & Industry Investment Trends
Global Insurance Asset Management AASCIF Annual Workshop Fall 23 23 GSAM Insurance Survey & Industry Investment Trends Michael Siegel, PhD Global Head of GSAM Insurance Asset Management September 3, 23
More informationHigh Yield Municipal Bond Outlook
INSIGHTS High Yield Municipal Bond Outlook 203.621.1700 2014, Rocaton Investment Advisors, LLC EXECUTIVE SUMMARY Uncertainty surrounding Federal Reserve interest rate policies and negative municipal headlines
More informationINCOME IN ALL MARKETS COLUMBIA STRATEGIC INCOME FUND Class A COSIX Class C CLSCX Class R CSNRX Class R4 CMNRX Class R5 CTIVX Class Z LSIZX
INCOME IN ALL MARKETS COLUMBIA STRATEGIC INCOME FUND Class A COSIX Class C CLSCX Class R CSNRX Class R4 CMNRX Class R5 CTIVX Class Z LSIZX NAVIGATING A CHANGING INTEREST RATE ENVIRONMENT Rise to the challenge
More informationBOND 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 informationHigh-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 informationNORTHERN TRUST HIGH YIELD FIXED INCOME QUARTERLY UPDATE. Highlighting attribution, economic and market analysis
NORTHERN TRUST HIGH YIELD FIXED INCOME QUARTERLY UPDATE Highlighting attribution, economic and market analysis December 31, 2015 Northern Trust Asset Management 50 South La Salle Street Chicago, Illinois
More informationWhy high-yield municipal bonds may be attractive in today s market environment
Spread Why high-yield municipal bonds may be attractive in today s market environment February 2014 High-yield municipal bonds may be attractive given their: Historically wide spreads Attractive prices
More informationGuggenheim Investments. European High-Yield and Bank Loan Market Overview
Guggenheim Investments European High-Yield and Bank Loan Market Overview August 2015 European High-Yield & Bank Loan Market Overview Please see disclosures and legal notice at end of document. 2 August
More informationThe Master Statement of Investment Policies and Objectives of The Lower Colorado River Authority Retirement Plan and Trust. Amended June 16, 2015
The Master Statement of Investment Policies and Objectives of The Lower Colorado River Authority Retirement Plan and Trust Amended June 16, 2015 Introduction The Lower Colorado River Authority ( LCRA )
More informationImpact 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 informationInterest Rates and Inflation: How They Might Affect Managed Futures
Faced with the prospect of potential declines in both bonds and equities, an allocation to managed futures may serve as an appealing diversifier to traditional strategies. HIGHLIGHTS Managed Futures have
More information1. General Obligation Bonds (G.O.s): Bonds backed by the full taxing power of the issuer.
S&P INDICES Fixed Income February 2010 S&P Fixed Income Indices: Municipal Bond Investor Tool Kit Key Terms Alternative Minimum Tax (AMT): An extra tax that some taxpayers are required to pay in addition
More informationEnergizing High Yield Bond Investors: Finding Opportunities Amid Shifting Market Conditions
Energizing High Yield Bond Investors: Finding Opportunities Amid Shifting Market Conditions Energizing High Yield Bond Investors: Finding Opportunities Amid Shifting Market Conditions Contents Executive
More informationGauging Current Conditions: The Economic Outlook and Its Impact on Workers Compensation
Gauging Current Conditions: The Economic Outlook and Its Impact on Workers Compensation October 2006 The gauges below indicate the economic outlook for the current year and for 2007 for factors that typically
More informationHigh yield bonds. US senior loans update. begin on page 4.
Chief Investment Office WM 20 March 2014 High yield bonds US senior loans update Barry McAlinden, CFA, strategist, UBS FS barry.mcalinden@ubs.com, +1 212 713 3261 Loan performance can best be characterized
More informationThe 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 informationKDP ASSET MANAGEMENT, INC.
ASSET MANAGEMENT, INC. High Yield Bond and Senior Secured Bank Loan Outlook October 2015 Asset Management, Inc. 24 Elm Street Montpelier, Vermont 802.223.0440 HighYield@kdpam.com This is an analytical
More informationYukon Wealth Management, Inc.
This summary reflects our views as of 12/15/08. Merrill Lynch High Yield Master Index effective yield at 23%. Asset Class Review: High-Yield Bonds Executive Summary High-yield bonds have had a terrible
More informationArizona 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 informationSeeking 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 informationMarket Bulletin. November 7, 2014. U.S. High Yield: A bubble set to burst?
November 7, 2014 U.S. High Yield: A bubble set to burst? Grace Tam, CFA Vide President Global Market Strategist J.P. Morgan Funds Katy Fang Research Analyst J.P. Morgan Funds Tai Hui Managing Director
More informationHigh 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 informationDeutsche 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 informationAn 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 informationSeeking Alternatives. Senior loans an innovative asset class
Trends 09 10.11 Seeking Alternatives Senior loans an innovative asset class Dirk Wieringa, Alternative Investments Advisory Senior loans are an innovative asset class that provide a hedge against rising
More informationBRANDES. Brandes Core Plus Fixed Income Fund Class A BCPAX Class E BCPEX Class I BCPIX. Brandes Credit Focus Yield Fund Class A BCFAX Class I BCFIX
BRANDES Brandes Core Plus Fixed Income Fund Class A BCPAX Class E BCPEX Class I BCPIX Brandes Credit Focus Yield Fund Class A BCFAX Class I BCFIX Prospectus January 30, 2015 The U.S. Securities and Exchange
More informationThe Globalization of the High Yield Market:
The Globalization of the High Yield Market: Why Diversification Is An Increasingly Important Consideration In High Yield Investing The High Yield Team May 2013 The Globalization of the High Yield Market:
More informationAllstate Life Insurance Group Combined Management Discussion and Analysis For the Year Ended December 31, 2008
NAIC Group Code 0008 NAIC Company Code 60186 Employer s ID Number 36-2554642 Allstate Life Insurance Group Combined Management Discussion and Analysis For the Year Ended December 31, 2008 The Allstate
More informationThe timeless (and timely) case for high-yield bonds
INCOME EATON VANCE Looking beyond traditional sources of yield MARCH 2016 TIMELY THINKING The timeless (and timely) case for high-yield bonds SUMMARY High-yield bonds occupy a special capital market niche:
More informationLeveraged Bank Loans. Prudential Investment Management-Fixed Income. Leveraged Loans: Capturing Investor Attention August 2005
Prudential Investment Management-Fixed Income Leveraged Loans: Capturing Investor Attention August 2005 Ross Smead Head of US Bank Loan Team, Prudential Investment Management-Fixed Income Success in today
More informationNavigating Rising Rates with Active, Multi-Sector Fixed Income Management
Navigating Rising Rates with Active, Multi-Sector Fixed Income Management With bond yields near 6-year lows and expected to rise, U.S. core bond investors are increasingly questioning how to mitigate interest
More informationSMSF A GUIDE TO FIXED INCOME INVESTING IN A VOLATILE ENVIRONMENT AMP CAPITAL SMSF 1
SMSF A GUIDE TO FIXED INCOME INVESTING IN A VOLATILE ENVIRONMENT AMP CAPITAL SMSF 1 Global markets and investment strategy are at an interesting juncture. There appears to be a positive backdrop for global
More informationInvesco s Senior Loan Platform. May 2012. Scott Baskind Senior Portfolio Manager 0000000. Presented by:
Invesco s Senior Loan Platform May 2012 Presented by: Scott Baskind Senior Portfolio Manager 0000000 Bank Loans are Trading Cheap to Historic Levels % Par Average Bank Loan Bid Source: Standard & Poor
More informationInvestment 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 informationMainStay 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 informationPerspectives 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 informationGlobal Bond Fund FAQ April 2016
April 2016 333 S. Grand Ave., 18th Floor Los Angeles, CA 90071 (213) 633-8200 1. What is the investment objective of the DoubleLine s Global Bond Fund? The DoubleLine Global Bond Fund seeks to generate
More informationBank Loan Market Overview: Opportunities for Diversification, Risk Reduction, and Return Enhancement
Bank Loan Market Overview: Opportunities for Diversification, Risk Reduction, and Return Enhancement August 2013 Niklas Nordenfelt, CFA Managing Director and Senior Portfolio Manager Sutter Credit Strategies
More informationMadison Investment Advisors LLC
Madison Investment Advisors LLC Intermediate Fixed Income SELECT ROSTER Firm Information: Location: Year Founded: Total Employees: Assets ($mil): Accounts: Key Personnel: Matt Hayner, CFA Vice President
More informationGlobal High Yield. Diversification in the asset class. June 2016
Global High Yield Diversification in the asset class June 2016 Authored by: Mary Bowers, CFA, Portfolio Manager, Global High Yield Julian Moore, Product Specialist, Global Credit Global High Yield Executive
More informationA strategic, multisector approach to fixed-income investing
Alternative Solutions Forward Credit Analysis Long/Short Fund A strategic, multisector approach to fixed-income investing Is it time to adapt your fixed-income approach? Today s fixed-income investors
More informationCMG Managed High Yield Bond Program. 2015 CMG Capital Management Group, Inc.
CMG Managed High Yield Bond Program About CMG CMG is a Registered Investment Advisor located in King of Prussia, Pennsylvania founded in 1992 by Stephen Blumenthal. Since our inception, CMG has embraced
More informationAre 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 informationThe role of floating-rate bank loans in institutional portfolios
By: Martin Jaugietis, CFA; Director, Head of Liability Driven Investment Solutions DECEMBER 2011 Yoshie Phillips, CFA, Senior Research Analyst Maniranjan Kumar, Associate The role of floating-rate bank
More informationUnderstanding Bank Loans: Opportunities for Diversification and Risk Reduction
Understanding Bank Loans: Opportunities for Diversification and Risk Reduction December 28 By: Niklas Nordenfelt, CFA Senior Portfolio Manager, Co-Manager of Sutter High Yield Fixed Income Paolo L. Villasenor
More informationFloating Rate Loans: An Attractive Yield Opportunity
Floating Rate Loans: An Attractive Yield Opportunity Joseph Lynch portfolio manager Bank Loan Management Bond yields remain at record lows and the Fed continues to espouse policy to keep interest rates
More informationDocumeent title on one or two lines in Gustan Book 24pt Commercial mortgages are HOT!
TIAA-CREF Asset Management Documeent title on one or two lines in Gustan Book pt Commercial mortgages are HOT! Martha Peyton, Ph.D., Managing Director TIAA-CREF Global Real Estate, Strategy & Research
More informationBond Mutual Funds. a guide to. A bond mutual fund is an investment company. that pools money from shareholders and invests
a guide to Bond Mutual Funds A bond mutual fund is an investment company that pools money from shareholders and invests primarily in a diversified portfolio of bonds. Table of Contents What Is a Bond?...
More informationSenior 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 informationTaxable 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 information9/30/81: 15.84% Real yield average: 2.46% Real 10-year Treasury yield 12/31/15: 0.25% -5% 58 63 68 73 78 83 88 93 98 03 08 13
NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE INVESTMENT INSIGHTS Building better fixed income portfolios 1Q 2016 PLEASE VISIT jpmorganfunds.com for access to all of our Insights publications. Get
More information