FINSUM

FINSUM

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Not a fan of leaping off a tall building in a single, crisp bound? Without a parachute? Odd but, well, okay.

 

Nevertheless, if that’s your mentality, you might tip your glass to active fixed income management. Afterall, one of the primary things it delivers is mitigating risk, according to npifund.ngontinh24.com.

 

For example, it yields investments beyond the fixed income benchmark index and facilitates the ability of managers to either push or tamp down risk. A passive strategy? Um, nada.

 

And active fixed income managers who have their antenna up can abandon possible issues before the wreak havoc on client portfolios, the site continued.

And that’s not all, no siree. They also rachet down interest rate sensitivity and keep their hands firmly on the wheel when it comes keeping the length of risk under their thumb, according to catalyst-insights.com. What’s more, they’re adept at uncovering yield against a low yield backdrop and get the most out of the trade off between duration exposure and yield capture.

 

And you might say they’re rather nimble, with an ability to seize on opportunities stemming from dynamic economic and policy shifts. A prime example, if you’re really keen on being reminded: the recent steepening of the bears. Gee, thanks, ladies and gentlemen, right?

 

 

Saturday, 24 September 2022 07:33

Invesco Files for Four Active Fixed Income ETFs

Invesco, which is the fourth-largest U.S. ETF firm based on total assets, recently filed for four actively managed fixed-income ETFs. The fund firm is currently best known for its index-based funds and custom index strategies. However, the company is looking to branch out by adding actively managed fixed income to its stable. In a series of regulatory filings, the firm filed for four ETFs, including the Invesco High Yield Select ETF, the Invesco Municipal Strategic Income ETF, the Invesco Short Duration Bond ETF, and the Invesco CLO Floating Rate Note ETF. The Invesco High Yield Select ETF will be run by a team of managers led by Niklas Nordenfelt who currently leads Invesco’s High Yield fixed income team and recently took over the Invesco High Yield mutual fund. The Invesco Municipal Strategic Income ETF will invest 50%–65% of its assets in low- to medium-quality municipal securities, which the company defines as bonds rated BBB. The Invesco Short Duration Bond ETF will utilize the Bloomberg 1-3 Year Government/Credit Index as a reference in designing the portfolio. The Invesco CLO Floating Rate Note ETF will primarily invest in collateralized loan obligations that have limited interest rate sensitivity and strong credit profiles.


Finsum:Invesco is looking to expand its ETF product line with the registration of four actively managed bond ETFs.

While rate hikes appear to be hurting stock and bond prices this year, the rise in yields has made short-term bond ETFs more attractive to yield-seeking investors. As the Fed continues to lift its benchmark federal funds rate to target inflation, bond rates have followed suit. This has been especially true for short-term bonds. In fact, short-term rates are even yielding more than longer-term rates in some cases. For example, the two-year Treasury note had a recent yield of 4%, which was higher than the 10-year Treasury note, with a yield of 3.58%. Plus, investors in short-term bonds are taking on less interest rate risk while getting paid more in interest. If rates continue to rise, bonds with shorter maturities are expected to fall less in price than longer-term bonds. That makes short-term bond ETFs an attractive option for income investors. For instance, the iShares Short Treasury Bond ETF (SHV), which holds Treasuries with maturities of less than a year, has a 30-Day SEC yield of 2.69%, while its price performance on the year is essentially flat.


Finsum:The Fed’s current interest rate policy has resulted in higher yields and less risk for short-term bond ETFs.

Saturday, 24 September 2022 07:24

Talent Top Priority for RIAs

According to a recent Charles Schwab RIA Benchmarking Study, talent is the top strategic priority for RIAs. This matches a Talent Management Study from San Francisco-based RIA consultancy DeVoe & Co., which showed recruiting is the biggest concern RIAs face today concerning talent. A recent Barron’s article highlighted the challenges RIA face when recruiting advisors. Firms are facing headwinds such as a rapidly aging workforce, a lack of young advisors to take over, loss of talent from the Great Resignation, and competition from mega financial firms. Barron’s highlighted the fact that over one-third of advisors are likely to retire within the next 10 years according to a study by Cerulli Associates. In addition, according to a survey by Ameriprise Financial, advisory firms currently have an average of three open positions at their firms. Some RIAs are turning to college students to fill the talent gap as the competition for experienced advisors is immense, while others are recruiting from banks and offering perks such as firm equity, high cash compensation, and generous payouts.


Finsum:Due to an aging workforce and strong competition, recruiting is a top priority for many RIA firms.

Thursday, 22 September 2022 05:31

The Case for Dividend-Paying Stocks

by Thomas Forsha, CFA

A city skyline at night

Description automatically generated with medium confidence

Is now the time to be adding dividend-paying stocks to your portfolio? With interest rates moving higher, and deflationary pressures subsiding, the key drivers of growth outperformance over the past decade appear to be stalling.

What seems to be a longer-term shift may support value and higher quality dividend-paying companies versus speculative growth companies.

The promise of a dividend check provides an additional dose of certainty for investors. According to Ned Davis Research, dividend-paying stocks in the S&P 500® tend to underperform non-payers in the months leading up to the first-rate increase of a tightening cycle, but in the years after the initial increase dividend payers have outperformed on average by a wide margin. While the past decade has been tough for dividend-focused investors, the best performance for dividend payers has historically been the period that followed the first fed funds rate increase. 

Source: Ned Davis Research, Inc. See NDR Disclaimer at www.ndr/copyright.html.

For vendor disclaimers refer to www. ndr.com/vendorinfo/

With interest rates marching higher and the yield curve steepening, Ned Davis Research points toward the potential for the outperformance of value stocks during a rising rate environment. Will the yield curve steepen over the second half of the year as the Federal Reserve is able to successfully manage a soft landing for the economy, or will tightening prompt a recession causing the yield curve to collapse again? Either outcome is likely to prove favorable for the relative performance of value strategies. And historically, the average value stock tends to enjoy higher dividend income than the average growth stock.  


Past performance is not a guarantee of future results.

Diversification does not guarantee a profit or protect against a loss in declining markets.

Investing involves risk including possible loss of principal. There is no guarantee that these investment strategies will work under all market conditions, and each investor should evaluate their ability to invest for a long term, especially during periods of downturns in the market.

The S&P 500 Index is a capitalization-weighted index of 500 stocks. The S&P 500 Index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

This does not constitute investment advice or an investment recommendation.

This represents the views and opinions of River Road Asset Management. It does not constitute investment advice or an offer or solicitation to purchase or sell any security and is subject to change at any time due to changes in market or economic conditions. The comments should not be construed as a recommendation of individual holdings or market sectors, but as an illustration of broader theme.

Data is from what we believe to be reliable sources, but it cannot be guaranteed. River Road Asset Management assumes no responsibility for the accuracy of the data provided by outside sources.

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