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Assessing Opportunities across the Risk Spectrum,+2020&oq=Assessing+Opportunities+across+the+Risk+Spectrum+June+8,+2020&gs_lcp=ChFtb2JpbGUtZ3dzLXdpei1ocBAMOgcIIxDqAhAnUNsbWNsbYL4paAFwAHgAgAGpAogBqQKSAQMyLTGYAQCgAQKgAQGwAQ8&sclient=mobile-gws-wiz-hp

Assessing Opportunities across the Risk Spectrum
June 8, 2020

While recent market performance would suggest that investor optimism appears to be in full flower, there are still a great many uncertainties associated with how economies and markets will respond to pandemic-related developments in the months ahead. Long-term investors weighing their options for such an environment may be well served by employing an active manager offering a breadth of carefully constructed strategies to navigate the changed investment landscape of a post-coronavirus world.
After the March sell-off and the spring rally, where should investors focus their attention? Here, we outline four strategies that may align with different levels of risk tolerance in this uncertain environment.


  • Here’s a pdf found on link - slightly less daunting:

    Innovation as a Core Asset Class
    Ultra-Short Credit
    Multi-Sector Bonds
    Convertible Securities (Others have said preferreds)

  • edited June 30
    “Ultra Short Bonds Recently Offered Unusually High Excess Yield with Limited Credit Risk.”

    Yes - But not before investors were shaken by an unprecedented drop in NAV in March /April. I have to believe many fled these funds before they rebounded. TRBUX dropped over about a month‘s time from above its benchmark NAV of $5.00 to near $4.85 - a huge loss for this cash-like holding. Since than it’s soared to well over $5.05. Federal Reserve buying of corporate bonds had to play a part in the rebound, though I still don’t fully understand what caused this turmoil at the short end of the curve in the first place. The rush to cash was about as nutty as the hoarding of toilet paper.

    Just a thought based on quick look at John’s link. I’ll perhaps add more. No better or worse, I suspect, than what you’d come across elsewhere. It begs incredulity to think this short term stuff - yielding a percent or less post expenses - is suitable to grow your nest egg. Constitutes more of a holding pattern to perhaps avoid future losses.

    Selected Excerpts (slightly edited / condensed)

    Moving Back Into Investment Grade and High Yield: Multi-Sector Bonds

    “Similar to what we saw in the ultra-short market, credit spreads widened substantially across investment grade, high yield, and securitized product sectors in February and March. That was followed by a strong, though somewhat uneven rally since late March, as not all segments of the market participated in the recovery equally. We believe this has created potential opportunities for active managers to identify attractive relative value opportunities. We would also note that high yield spreads remain nearly 200 basis points (bps) above the levels seen earlier this year, based on the ICE BofAML U.S. High Yield Index. In an environment where the 10-year U.S. Treasury bond yield has jumped by 30 bps, but remains below 1.0% (based on Bloomberg data), the credit markets may offer sources of higher income and the potential for greater total return over Treasuries.”

    Historically, Convertible Bonds Have Outperformed in Market Declines

    “Those looking to increase equity exposure but concerned about the potential for another pullback in the stock market may want to consider convertible securities. As we have previously noted, the asset class historically has generated compelling risk-adjusted returns over the long term. One other noteworthy feature, in our view: Convertibles historically have participated in the upside of rising equity markets, while offering some degree of downside protection during most market pullbacks.”

    Innovation Equities

    “One way to prepare the equity sleeve of an investment portfolio for the longer run—and further potential ups and downs of economic cycles--may be through increased exposure to innovation equities. These are stocks of those companies whose leading-edge products or services may position them for strong growth in the months and years ahead. ‘Innovation was already leading the market in terms of return, and growing size in the economy, even before we headed into this pandemic crisis,’ says Brian Foerster, Lord Abbett Investment Strategist.’Cloud technology, artificial intelligence (AI), biotech and medical devices, e-commerce, and a new area that we've classified as ‘virtual empowerment,’” were among the industries that displayed the most resiliency during the recent downturn’ he adds.”

    Nothing very deep here folks. Looks like “Innovation Equities“ is the new buzz-term for what we used to call “Tech Stocks“. :)
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