Our perspective on global micro event and strategies.
As an investment analyst in Investment Product and Fund Strategies, Will works closely with the fixed income investment teams and investment directors to help ensure the integrity of their investment approaches. This includes meeting regularly with the teams and providing analysis of portfolio positioning, performance, and risk exposures. He contributes to developing new products and client solutions and managing business issues such as capacity, fees, and guidelines, while acting as a portfolio management liaison for our clients' relationship teams. He also participates in meetings with clients, prospects, and consultants to communicate our investment philosophy, strategy, positioning, and performance.
As we explored in our last blog post, Helping European investors navigate inflation fears, the current market environment presents challenges for fixed income investors. Chief among them: rising interest rates. Against this backdrop, rather than simply take a portfolio’s effective duration1 at face value, we encourage investors to consider a multitude of factors when deciding how best to allocate their fixed income capital. One such factor is that of empirical duration, which (as opposed to effective duration) calculates a bond’s sensitivity to rising rates based on historical data versus using a preset formula.
As global central banks take steps to tackle inflation, a variety of monetary policy responses remain possible throughout the remainder of 2022. Figure 1 highlights three hypothetical scenarios.
From a purely theoretical standpoint, the concept of duration implies that all non-floating-rate fixed income portfolios will suffer…
After years of near deflation across much of Europe, the region is now witnessing persistent price increases. Second-order effects of recent geopolitical developments, particularly the ongoing war in Ukraine, are intensifying the current inflationary environment. This apparent shift to a higher inflation regime, with the resulting expectation of tighter monetary policy and rising interest rates, presents a material challenge for European fixed income investors, raising questions such as:
How best to answer these questions depends on the specific circumstances of each investor, but over the coming months, we aim to share some pointers to help European investors think through the implications of higher inflation for their fixed income portfolios. As a first step, let’s take a closer look at…