According to a July survey conducted by VettaFi and State Street Global Advisors, high yield credit strategies were the bond style most appealing for advisors to add to client portfolios. With treasury yields narrowing and the Federal Reserve aggressively hiking rates to tackle inflation, investors are looking to take on more credit risk to receive higher yields. This is evident as three top high yield corporate bond ETFs, that collectively manage $44 billion, pulled in $4.7 billion in flows during July. The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) brought $1.9 billion in new assets during July, while the SPDR Bloomberg High Yield Bond ETF (JNK) and the iShares Broad USD High Yield Corporate Bond ETF (USHY) brought in $1.7 billion and $1.1 billion, respectively. It appears that investors currently prefer high yield bond ETFs with higher risk profiles to funds that offer more protection against rising rates.
Finsum: Due to the Fed’s rising rates policy and narrowing yields, investors flocked to high-yield bond ETFs last month.
First Republic Bank’s wealth management unit added two wealth management teams to its ranks last week. The firm announced on Wednesday that a Merrill Lynch Private Wealth Management team that manages over $1 billion in assets left the wirehouse after 15 years to join First Republic in Palo Alto. Theresa Rutledge and Anthony Custodio, the lead advisors, each produce $4.3 million in annual revenue. Both have a $10 million account minimum. Then on Friday, the Silicon Valley bank announced that it lured another top producer to the bank, this time from J.P. Morgan Advisors. David J. Loeb generates $1.8 million in annual revenue and manages $250 million in assets. The advisor is located in Palm Beach Gardens, Florida, where First Republic is looking to expand. The company, which has over 200 brokers, has hired around five teams this year, which puts it on pace with its annual average of 10.
Finsum: First Republic Bank continues its advisor recruitment program by luring two wealth management teams to its ranks last week.
Tech stocks are suffering and pushing the Hong Kong broad market index lower early this week. Companies like Alibaba and JD.com were driving this slump. Overall, economic data has been positive for China though. The latest report showed that dollar-based exports grew by almost 20% in July. The region as a whole is experiencing diverging patterns in equity performance as South Korea and China excluding Hong Kong both grew. Still with currency risk higher than usual as a direct result of Fed tightening and higher inflation emerging market investors are having a difficult time finding North in the current environment.
Finsum: If covid is starting to slow as a result of the climate it could be great for countries relying on trade.
Dems are including a 1% tax on share buybacks in Biden’s climate and tax bill which is being pitched as an inflation bill. The tax was included to get Arizona Senator Krysten Sinema on board with the legislation. Most analysts say this will raise tensions with Wallstreet as investors will be apprehensive about the impact immediately and what it opens the door to moving forward. Many companies have recently engaged in massive buybacks using the excess profits to reinvest in their own companies. Experts say this could generate a lot of revenue, more than the carried interest which is expected to bring in $14 billion.
Finsum: Buy back boogeyman at it again. This legislation stops companies from doing the most responsible thing they can with excess cash.
It might be easy to see why some opt for active fixed income strategies.
After all, they boast a host of advantages, including the paring down interest rate sensitivity and control duration risk, according to catalyst-insights.com.
Echoed npifund.com: Risk mitigation is the real advantage of active fixed-income management. Unlike a passive strategy, the active fixed route dispenses the opportunity set of investments beyond the fixed income benchmark index. Not only that, managers can hit or release the button on risk.
Additionally, with active funds, careful security selection may culminate in careful liquidity and quality analysis, according to etfdb.com. Rather than being on the hook for thousands of bonds to generate a carbon copy and index’s holdings, when it comes to security selection, actives pickers can be more discerning.
A new paper entitled ‘Active Fixed Income Perspectives Q3 2022: Bonds are back,’ the potential for active finds to uncover solid returns in the bond markets – even as default rates escalate and central banks try to leave things intact, the fixed income team at investment giant Vanguard’s fixed income team, fronted by Sara Devereux, has analyzed the potential for active funds to find solid returns in the bond markets.