Increasing Share of BBB-Rated Bonds and Changing Credit Fundamentals in the Investment-Grade Corporate Bond Market

Since the 2008/2009 financial crisis, BBB-rated bonds have seen significant growth in the U.S. Today, they constitute more than half of the U.S. investment-grade bond market. The increasing share of BBB-rated bonds has dragged the S&P U.S. Investment Grade Corporate Bond Index average credit rating lower, and is accompanied with higher leverage of BBB-rated bond Read more […]

Performance Trickery, part 2

Here is a 22-year history of a (hypothetical) actively-managed portfolio and its benchmark: Results have been decisively mediocre. The portfolio outperformed in only five years out of 22, for a hit rate of 22.7%. Its cumulative return (68.2%) lagged that of the benchmark (74.0%), and its volatility was higher (4.79% vs. 4.25%). The manager’s marketing department Read more […]

How Is Your Undefined Benefit Plan Going?

I have probably been receiving them for years, but lately I have noticed opposing position papers in my inbox. Some claim Americans need a revival of defined benefit (DB) plans because of a looming retirement crisis, while others contend that defined contribution (DC) plans are doing great and there is no cause for alarm. DC Read more […]

Year-End 2018 Canada SPIVA®: Challenging Three Active versus Passive Misconceptions

Our Year-End 2018 Canada SPIVA scorecard was released today.  In addition to showing that the majority of Canadian active equity managers failed to outperform their benchmarks, the scorecard’s results provide the opportunity to dispel some common misconceptions.  Here is a brief summary. 1) Higher volatility does not necessarily result in outperformance by active managers A Read more […]

Performance of Latin American Markets in First Quarter 2019

As we close the first quarter of 2019, we see that Latin America did well for the period. The broad regional index, the S&P Latin America BMI, yielded nearly 9% and the S&P Latin America 40, representing the blue-chip companies in the region, generated returns just shy of 8%. These were in line with the Read more […]

Spoiler Alert: Yes

We recently updated our paper asking Is the Low Volatility Anomaly Universal? The alert reader (and we have no other kind) will have guessed that it is. This is an empirical conclusion, but a theoretical digression might help explain why this is so remarkable. Low volatility strategies explicitly seek to lower the risk of a Read more […]

How to Stop Worrying about Inflation

Inflation in the US averaged 1.5% annually for the last five years with a peak of 2.9%. Despite today’s low and stable inflation numbers, anxiety that the price level will leap up is driving a search for the reasons it seems low. Today’s inflation is a bit lower than the average since 1914 of 3.2% Read more […]

S&P 500® Closes at New Record High

The S&P 500 closed April 23, 2019, at a new record high. The index’s closing value of 2,933.68 is the highest since the 2,930.75 posted on Sept. 20, 2018. From that previous high, the benchmark declined 19.86% to 2,351.10 by Dec. 24, 2018, narrowly avoiding bear market territory. December 2018 was the second-worst December in Read more […]

Volatility Test: Defensive Factor Indices versus Actively Managed Funds

Indices based on factors such as low volatility and quality generally have defensive characteristics. These strategies tend to outperform the broad benchmark in down markets, as previous studies have shown.  Yet some market participants also believe that active management fares somewhat better than the benchmark in periods of volatility and distress. In 2018, the S&P Read more […]

Start Out with Passive Investing

Professionals in varied fields are often too busy to research, plan, and understand the best investment style.  A common worry is the risk associated with equity markets.  Yet this anxiety is primarily due to myth and inadequate knowledge. To protect, add value, and grow their assets, both institutional and retail investors face a myriad of Read more […]