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Two Strategies For Investors That Want To Hold Bonds (Advisor Perspectives)
Despite the concerns about rising interest rates, investors choose to hold bonds because it offers diversification. But what strategies can/should they use? Jeff Hussey of Russell Investments highlights two strategies.
The first strategy involves increasing credit exposure, but investors should keep two things in mind before doing so he writes. "Increasing credit exposure of a fixed income portfolio also increases its correlation to the equity market. This can become a harmful side effect for the overall portfolio," he writes in Advisor Perspectives. Also, "the current valuation of most credit sectors is slightly rich, as measured by credit spreads, compared to historical averages.[1] This calls for a selective, value-minded approach to adding a credit yield cushion to the portfolio."
The second strategy involves looking for value opportunities outside of the U.S. This is partially because global central banks are moving in different directions when it comes to monetary policy and this should "create opportunities among currencies and bond markets."
If You're In The Market, You Owe It To Yourself To Read This Paragraph (Musing On Markets)
Josh Brown has pointed readers to valuation guru Professor Aswath Damodaran's latest blog post. While dissecting the Facebook-WhatsApp deal he offered up an important reminder to investors.
"My experience with markets has been that no one has a monopoly on virtue and good sense and that the hubris that leads to absolute conviction is an invitation for a market take-down. To investors to view deals like the WhatsApp acquisition as evidence of irrational exuberance, remember that there are traders who are laughing their way to the bank, with the profits that they have collected from their social media investments. Similarly, for traders who view fundamentals and valuation as games played by eggheads and academics, recognize that mood and momentum may be the dominant factors driving social media companies right now, but markets are fickle and fundamentals will matter (sooner or later)."
The Financial Advisory Industry Is Facing A 'Brain Drain' (Reuters)
32% of financial advisors are expected to retire in the next ten years, and the industry isn't hiring at the pace needed to replace them, according to a report from Cerulli Associates. Firms used to have "big recruiting programs" until the financial crisis, Scott Smith, a Cerulli Associates director told Mark Miller at Reuters. "Now, they just recruit people from other firms instead of training their own - it's easier and more productive. They're all kicking the can down the road in terms of who will develop the next generation of advisers."
Fidelity's New Head Of Asset Management Comes From The Fixed-Income Side (Morningstar)
Charles Morrison has been named head of asset management at Fidelity, reports Katie Rushkewicz Reichart in Morningstar. Morrison has been with Fidelity for 27 years. "Choosing someone from the fixed-income side might seem unusual given that more than half of Fidelity's assets are in equity funds," writes Rushkewicz Reichart.
"However, Fidelity's fixed-income group is among the best in the industry, taking a risk-conscious, team-oriented approach that's produced strong long-term results. Morrison may bring more of a risk-management focus to the equity side, though it's hard to know exactly how that will play out." Morrison is replacing Ron O'Hanley.