white papers

Bond Concepts Series

Learn the nuances of fixed income investing, including the risks, opportunities, and investment styles.

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Interest Rate Risk: Understanding Duration and Convexity

Most people look at the maturity of a bond to gauge the security’s risk. Maturity, however, only looks at the time until repayment of principal. To accurately measure a security’s risk, both principal and coupon payments must be considered. The use of two metrics better defines a security’s risk: Duration and Convexity.

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Active Management of Bond Risks

Building a bond portfolio with a desired risk-to-reward profile is more complex than simply buying bonds and holding them to maturity. Understanding the risks in fixed income can help an investor avoid pitfalls while optimizing opportunities in pursuit of long-term goals. An investor must determine the maturities, structure, sectors, and credit qualities appropriate for a given risk tolerance and consider how the bonds fit in an overall portfolio.

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Yield To Maturity (YTM): The Yield That Matters

In fixed income investing, there are several different ways to measure an individual bond’s ability to produce income. Three of the most often cited measures are a bond’s coupon rate, current yield, and yield to maturity. Each measure has its place, but which matters the most?

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The Power of Dynamic Asset Allocation

Diversification plays an important role in investing and the implementation of diversification within a portfolio can be a powerful tool that mitigates risk. However, diversification itself may not always be enough to achieve an investor’s goals and, in some instances, can even stand in the way. We believe a dynamic approach to portfolio construction that improves upon traditional asset allocation methodologies can offer better risk-adjusted returns.

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A Captive Guide for Managers

In this guide, insurance portfolio managers Don Miller and Jeff Matthias describe a time-tested approach for steering both young and established insurance companies towards the potential for improved risk-adjusted returns with ample consideration given to an insurer’s unique situation.

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Stock and Bond Market Risk Measures: A Review of Common Risk Statistics

There are many ways to measure risk in a stock or bond portfolio. Investors might look at price volatility, return fluctuation in relation to a benchmark, how a portfolio responds in a down or up market, and more. The following are common statistics investors use to help align their portfolios with their individual risk tolerance and set them up for optimal risk-adjusted returns.

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Risk and Rewards of Rising Rates

As every fixed income investor knows, bond prices fall as rates rise. Obviously, falling prices reduce returns. In today’s low yield environment, portfolio income offers little protection, meaning price changes dominate total return. However, fixed income investors with long time horizons should actually root for higher rates, despite the short term losses incurred.

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