A manager at Artemis believes now is the perfect time to consider active fixed income solutions. Grace Le, who co-manages the Artemis Corporate Bond Fund, told Financial Times that an active bond manager’s job is to protect their clients during uncertain times and that is exactly what we are experiencing now. She believes that the reversal of quantitative easing led to more volatility in bond markets, resulting in a “boon for active investors.” Investors are dealing with inflation, macroeconomic uncertainty, and the potential for a recession. Muzinich & Co's co-head of public markets Michael McEachern told the publication that active managers can invest in shorter-duration bonds less impacted by increasing rates and rotate into higher-quality credit that is less sensitive to the current environment. Managers can also avoid concentration in a portfolio and deploy carry trades, which means borrowing at a low-interest rate and investing in an asset that provides a higher return.
Finsum:According to two bond fund managers,investors should consider active fixed income in times of economic and market uncertainty.
NEOS Investments, an investment firm specializing in options-based income solutions, launched three actively managed ETFs this week, including two fixed income ETFs designed to help advisors and investors navigate the current market environment. The NEOS Enhanced Income Aggregate Bond ETF (BNDI) generates monthly income from investing in a representative portfolio of the U.S. Aggregate Bond Market and implementing a data-driven put option strategy. The NEOS Enhanced Income Cash Alternative ETF (CSHI) generates monthly income from investing in a portfolio of 1–3-month Treasury Bills and implementing a data-driven put option strategy. Both ETFs, which now trade on the NYSE, utilize a put spread approach that involves selling short puts and buying long puts to generate option premiums to be distributed as income without taking on outsized risk.
Finsum:Options-based investmentfirmNEOSrecently launched two fixed income ETFsoffering investors a novel approach to monthly income.
RBC Wealth Management’s aggressive recruiting has landed another team. The firm was able to lure Coatoam Wealth Management Group, a $560 million team, away from Merrill Lynch. The team, which is led by Managing Director Brian Coatoam, is joining RBC in their new office in Winter Park, FL. Coatoam has been in the industry for 24 years. He got his start with Advantage Trading Group and worked for Morgan Stanley before joining Merrill Lynch. He leads a six-person team, which includes two Certified Financial Planners, Derek Grimm, and Ryan Plank. RBC, like many firms, is pushing expansion in Florida as the state lures more wealthy investors due to a lack of income and capital gains taxes. RBC had previously announced a father-son advisor team joining its office in Palm Gardens and in January the firm recruited a $1 billion Florida team from Truist.
Finsum:With more wealthy investors moving to Florida, RBC continues its aggressive expansion in the state by recruiting a $560 million Merrill Lynch team.
One of the most popular allocations for model portfolios in recent history has been the 60/40 model. A classic allocation with 60% invested in stocks and 40% invested in bonds. Until recently, this model has generated stable returns for investors. However, this year’s brutal returns for both the equity and fixed income markets have investors wondering if the traditional 60/40 model provides adequate protection. In most previous equity downturns, investors have been able to count on bond instruments to hedge negative equity performance due to an inverse relationship between stock returns and bond yields. But this year, investors have been faced with both a down stock market and a hawkish Fed, leading to losses in both asset classes. This has made the 60/40 model seem outdated as of late. While the 60/40 model may not be dead yet, investors may want to consider model portfolios with additional asset classes in the current market environment.
Finsum:With a down stock market and a hawkish Fed, investors may want to reconsider the 60/40 model portfolio.
Based on comments made at the Fed's Jackson Hole conference, volatility is here to stay. Many of the economic policymakers who spoke at the conference believe we are entering into a highly volatile economic period. If the last few years, which have included inflation, supply chain disruptions, and back-and-forth growth, weren’t enough, we are likely to see more frequent and larger shocks in the years to come. Plus, the continued hawkish stance from Fed chair Jerome Powell means a reversal in Fed policy isn’t likely any time soon. This means more volatility in the market for the foreseeable future. Investors can no longer rely on central bank rate cuts to support markets during downturns. The Fed is now expected to raise interest rates another 75 basis points during its next policy meeting in September. According to CME Group data, approximately 75% of traders are now pricing a third consecutive increase of 75 basis points.
Finsum:Based on comments made at the Fed's Jackson Hole conference, investors can expect continued economic and market volatility for months and even years to come.