On June 6, the European Central Bank (ECB) cut its main interest rates by 0.25%, becoming the first major developed markets (DM) central bank to cut rates. This follows recent decisions by central banks in Canada, Sweden, and Switzerland to reduce their policy rates, and it marks a change in the interest rate cycle that […]
June 2024
Private credit offers distinct advantages and appeal in a low return environment, but investors should be aware that behind the name is a diverse array of strategies, some more familiar to institutional investors than others, each with idiosyncratic risks. In this report, we describe the broad array of private credit strategies and position them along the risk/return spectrum, review the investment process, discuss expectations for the performance of these strategies in various parts of the economic cycle, and highlight some key risks for investors to consider.
May 2024
No. While recent developments may be a sign that bitcoin is gaining credibility, it remains a highly speculative investment that offers no cash flows. Gold—a more stable and defensive option than bitcoin—also offers no yield. Investors looking for portfolio defense should look to long US Treasury securities, which offer reasonable yields and protection in a […]
March 2024
No, we expect Consumer Price Index (CPI) inflation will continue to moderate toward central bank target levels in 2024. As a result, we believe key central banks will cut policy rates modestly this year to avoid overtightening. This should support our view that investors should hold a modest overweight to long Treasury bonds. Global inflation […]
February 2024
Over the past decade, executives overseeing corporate defined benefit (DB) pension plans have experienced significant regulatory reform and a full reversal of investment conditions. While rising liabilities once offset asset gains, the opposite is now true. Yet many organizations haven’t recalibrated their approach to plan management in response, leaving them exposed to unnecessary costs and […]
January 2024
We expect that most major central banks will cut policy rates modestly due to our view that inflation rates will continue to decline. The modest cuts will shift policy rates from restrictive levels closer to neutral levels, which are neither restrictive nor accommodative. Given this view and our view that economic activity will weaken, we […]
December 2023
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