Displaying items by tag: hedging

Bonds and equities have stood tall in the face of the many windfalls that have faced financial markets in the last month. However, even the bulls are getting worried and alternatives could provide relief and earn higher yield. Real estate via REITs are in a great position as an asset class and could perform well in the upcoming years with higher interest rates. Art is an overlooked alternative which has had high appreciation, outpacing 10 major classes since Covid according to CITI. Finally private equity has been a go to for many investors, and has seen record inflows post-covid while remaining less correlated with equities.


Finsum: The biggest draw to private equity is that fixed income is more correlated than ever with stocks and so alternatives provide a better hedge.

Published in Alternatives
Wednesday, 23 March 2022 18:43

Direct Indexing is the Volatility Antidote

Direct indexing is one of the fastest growing market segments and investors surveys confirm that customization is king of the modern landscape. Curulli Associates forecasts that direct indexing will grow faster than ETFs and mutual funds. Custom indexing has a legg up on traditional ETFs when it comes to volatility because investors can harvest losses as the market takes dips. With traditional ETFs investors have to just eat the losses as they slow the long run growth of the fund, but micro dips can be maximized by taking advantage for tax purposes, say industry quants.


Finsum: It's clear that direct indexing has advantages over traditional ETFs, but even when compared with their fees the tax savings is worth it for direct indexing strategies.

Published in Wealth Management
Wednesday, 16 March 2022 20:01

Here is a Great Inflation Antidote

Many investors have moved off of REITs and they are trading well below their 200-day moving averages. This makes them a value proposition, particularly as volatility starts to rise. Uncertainty particularly around Ukraine and Russia is fueling volatility but its uncorrelated with REIT volatility which gives it a huge risk advantage on top of it all they are more robust to inflation. Two great REITs to consider with great value at the moment are Alexandria Real Estate Equities and Crown Castle International. These REITs have healthcare and telecom exposures respectively which are in a particularly attractive position as healthcare spending is a higher portion of budgets and 5G is exploding.


Finsum: It’s easy to see that alternatives should be seeing inflows given the volatility in traditional equity and bond markets.

Published in Eq: Real Estate
Monday, 14 March 2022 20:51

Why Treasuries are Turning Around

There is nothing like an international conflict to generate a flight to safe assets, and as much pressure as treasury bond prices have taken in the last year, they are still the world’s premiere safe asset. Inflows post Russia’s invasion of Ukraine have lowered Treasury yields and raised bond prices. Additionally it appears that markets are either dubious of the Fed’s rate hikes or just don’t think it will take as many to get the jobs done. Regardless, many bond ETFs, particularly around treasuries have benefited such as the iShares 7-10 Year Treasury Bond ETF and the iShares 20+ Year Treasury Bond ETF which were up 2.0% and 2.6% respectively in the last week.


Finsum: Treasuries are still the global safe asset and they are still in short supply given the abnormally low levels of U.S. interest rates.

Published in Bonds: Treasuries
Monday, 28 February 2022 17:22

A Good Way to Hedge Interest Rate Risk

Fixed-income investors are in the doldrums when it comes to today’s ultra low yield environment. Guaranteed income from CDs is just not high enough, and while bonds may be secure their value is at a valley. Laddering annuities is maybe the best strategy, but the questions are under duration. In a flat yield curve going for a short duration makes sense, and as the yield curve steepens moving to long-term contracts is more attractive. In today’s interest rate market, the goldilocks spot is around 5-years, it is a much higher return than shorter-term annuities and longer-term contracts tie your money up without much more of a return boost. The best part is you can integrate this annuity laddering strategy into IRAs and take advantage of all the tax solutions they bring to the table.


Finsum: It's critical to ladder the right duration depending on the current rate environment and given how much interest rate risk there is today it's more important than ever to be precise.

Published in Bonds: Total Market
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