On July 23, the SEC voted in a set of long-debated reforms to the rules governing money market funds (MMFs). The reforms, which will take effect in 2016 to allow managers and investors time to adapt, are aimed at preventing a replay of the dangerous 2008 run on MMFs triggered when the Reserve Primary Fund…
The launch of the new Treasury floating rate notes has been a successful venture The initial auction for Treasury FRNs saw aggressive participation, with a high bid-to-cover ratio. The ratio came down slightly in subsequent auctions. Quarterly issuance has so far exceeded early predictions, and these securities have already assumed an important place in the…
A string of headlines over the last few months has thrust the issue of cash held by the foreign subsidiaries of US companies back into the spotlight. First was Apple Inc.’s announcement that the company was increasing its dividend and buying back more stock while at the same time issuing $12 billion in debt to…
Yes, but prepare to average back in as soon as rates approach fair value, and consider moving out to the longer end of the curve. We recommend maintaining neutral allocations to risky assets, but are placing a greater emphasis on diversification given we are at a more advanced stage of the economic and market cycle…
Summary Observations: Fiscal Year 2014 US equities returned 24.6% in the fiscal year ended June 30, 2014, ranking 31st in 114 fiscal years of data. The health care, information technology, and materials sectors all returned above 30%. All developed markets ended the fiscal year in the black, with Europe ex UK the best-performing region and…
Ominously familiar warning signs beg the question of whether a replay of 2007 is at hand; the answer is complicated Recent market activity has seemingly combined some of the excesses of 1999 with those of 2007. On a more general level, investors have grown more bullish and volatility across asset classes has collapsed. In contrast…
Stories about equity volatility plunging to “historical lows” have been ubiquitous in the financial press recently. When accompanied by references to above-average valuations and “over-heated” markets, the implication seems to be that investors should rush to buy protection via equity puts or volatility index options, presumably because some decline in equity markets (and thus increase…
Foreword The impact of fossil fuels on climate change is an important topic on the minds of many investors. We have been a part of many discussions with our clients about the decision to divest fossil fuel investments. There are thoughtful and passionate arguments on both sides of the issue, and we have a deep…
Bankers are fond of saying “bad loans are made during good times.” With equity markets reaching new highs, volatility and interest rates hovering around historic lows, positive economic growth, and increased merger activity, we could characterize today’s environment as the “good times.” Since credit markets run in cycles alongside the broader economy, investors need to…
While valuations continue to support a tactical overweight to emerging markets equities today, the rationale for a permanent or structural overweight is weaker Many of the classic arguments for a strategic overweight to emerging markets (potential for faster economic growth, underrepresentation in indices, diversification, and inefficiency of markets) lack convincing support or have diminished in…