We expect direct lending and European opportunistic private credit funds will outperform their long-term averages because of high asset yields and the pull back in credit availability among traditional lenders. We like structured credits, particularly high-quality collateralized loan obligation debt, and we expect high-yield bonds will outperform leveraged loans. But we remain neutral on high […]
December 2023
Yes. Municipal (muni) bonds have recently outperformed taxable equivalents before taxes and the tax advantage of high-quality munis has grown as interest rates have gone up. We recommend a neutral allocation to high-quality munis in taxable portfolios. Beyond the high-quality space, muni closed-end funds (CEFs) have the potential to deliver compelling after-tax returns. The previous […]
October 2023
Private credit has become a popular asset class among pension plan sponsors seeking yield enhancement over their public fixed income allocations. The non-bank finance market has flourished since the Global Financial Crisis due to a more restrictive bank regulatory environment, resulting in reduced bank lending activity, and a wide range of private credit opportunities are […]
July 2023
Saving on Pension Benefit Guaranty Corporation (PBGC) premiums has long been at the forefront of many pension risk management decisions. When interest rates were near historic lows during 2019 and 2020, many single-employer plan sponsors changed their methodology for calculating these premiums to reduce their tax obligation to the federal government. Although it appeared like […]
July 2023
Historically, we have recommended investors hold high-quality government bonds as a counterbalance in equity-heavy portfolios. However, in recent years, some investors have reduced their exposure to government bonds, given their low yields, in favor of cash. This was prescient in 2022. Global equities returned -16% in local currency terms, but government bonds also suffered steep […]
June 2023
On 20 March, investors awoke to news Swiss authorities had used emergency measures to push through a hastily arranged merger of Credit Suisse and UBS. Following two recent bank failures in the United States, the announcement raised questions over the health of European banks and the broader economy. While market pressure on another European financial […]
March 2023
What a difference a year makes. In the second half of 2021, investors were talking about a potential prolonged Goldilocks market. By year-end 2022, the Bloomberg US Aggregate Bond Index had posted its worst annual return on record and the S&P 500 had experienced a substantial pullback from recent historical highs. Amid this turbulence, pension […]
March 2023
Yes. Markets will be less vulnerable to rising rate risk next year, as the aggressive tightening that has weighed on markets for much of 2022 has moderated more recently since inflation has slowed. However, we see a pause in tightening as more likely than a pivot to easing in 2023 because inflation will be slow […]
December 2022