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Thursday, 27 January 2022
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Floating rate bonds protect investors from capital losses of long-duration fixed income as rates rise. Hybrid structures offer higher yields backed by strong banks issuing on both the ASX and in unlisted OTC markets.
Equity funds tend to receive most attention, and the media focuses on fund themes and new ideas. Surprising to many, fixed income is typically the quiet achiever in the Australian retail asset management industry.
As Sydney and Melbourne emerge from lockdown, there are some reopening trades in the Australian credit market which 'sophisticated' investors should consider as part of their fixed income portfolios.
High-yield bonds carry more risk than investment grade but they offer higher income returns. An allocation to high-yield bonds in a portfolio - alongside equities and other bonds – is worth considering.
It used to be Down, Down for prices but the new status quo is Down Down for emissions. Until now, the realm of ESG has been mainly fund managers as 'responsible investors', but companies are now pushing credentials.
There are plenty of voices on both sides of the inflation argument, but the ultimate impact of COVID should be deflationary. Australia is one of the last places to expect worrying signs of inflation rising.
Financial repression is suddenly part of our lexicon, but what is it and how can a fixed income fund take advantage of it? And why it is better to manage smaller amounts than multi-billion portfolios.
There's an assumption that bond yields and share prices have a predictable relationship. The positive correlation means that when yields rise due to a strong economy, so should stocks. That's not what happens.
The collapse of Virgin Australia not only hit shareholders, but their bond investors received between 9 and 13 cents in the $1. A widely-diversified portfolio can tolerate losses better than a concentrated one.
We are undergoing a multi-year transition where high near-term economic growth drives rising real rates and higher but stable inflation. It bodes well for risky assets but with volatility and changing correlations.
Heavy consumer spending, rising commodity prices and government deficits point to rising inflation. Given the risk in long-term fixed rate exposure, where else can bond exposure help generate income?
Equity valuations are lofty, but long bond rates have now returned to levels before the pandemic crisis. In a balanced portfolio, long bonds now provide more opportunity to cushion the volatility of equities.
Eligibility for the Commonwealth Seniors Health Card has no asset test and a relatively high income test. It's worth checking eligibility and the benefits of qualifying to save on the cost of medications.
This is our annual checklist of what retirees need to be aware of in 2022. It is a long list of 25 items and not everything will apply to your situation. Run your eye over the benefits and entitlements.
The Warren Buffett/Charlie Munger partnership is the stuff of legends, but even Charlie admits it is coming to an end ("I'm nearly dead"). He is one of the few people in investing prepared to say what he thinks.
Depending on personal circumstances, it may be time to rethink the bias to paying down housing debt over wealth accumulation in super. Do the sums and ask these four questions to plan for your future.
Markets don't seem normal, but Magellan is criticised for its caution. Higher interest rates to control inflation could create a recession and some of today's investing will turn out a mass delusion of modern history.
Are markets on a road to recovery or a path of potholes? Leading portfolio managers were asked for the theme that most excites or worries them in the year ahead, and what they will especially watch for.