Services Tags: Asset Allocation

Bank Loans vs. High Yield: Is One Safer Than the Other?

Year-to-date, bank loans and high yield bonds have been subject to a variety of market forces similar between the two sectors, but others have impacted each uniquely. While we typically recommend that clients allocate to both sub-investment grade credit asset classes on an equal-weighted basis in order to benefit from each of their strengths as well as the diversification, it is very sound and well-grounded for investors to ask — especially in light of this unprecedented crisis in which we find ourselves — what the unique advantages and disadvantages are from each. Certain investor situations may necessitate maintaining an overweight to one or the other or holding only one.

In this newsletter, we perform a deep dive into the nuances of the performance, technical factors, fundamentals, and valuations between bank loans and high yield in order to make these distinctions. In summary, we determine the merits of a modest overweight of high yield versus bank loans given the current environment due especially to two dynamics — the Fed’s unprecedented purchasing of high yield bonds and weakened bank loan demand as a direct result of weak CLO demand — explored in more detail in the following pages.

Read > Bank Loans vs. High Yield: Is One Safer Than the Other?

 

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Nat Kellogg Speaking at SBAI Institutional Investor Roundtable 11/28

On Wednesday, November 28, Nat Kellogg, CFA, will be speaking at the Standards Board for Alternative Investments (SBAI) Institutional Investor Roundtable in Chicago.

Nat will be joining the “Allocator Panel,” featuring senior representatives from various investment managers, funds, and consultants. The discussion will focus on two main topics:

Allocation priorities

  • Alpha vs. beta
  • Search for Alpha – where next?
  • Alignment and fees – what is the state of play?

Governance of pension funds – outsourcing versus internalising – an eternal circle?

  • Where to draw the line?
  • Benchmarking of internal capabilities
  • How much experience to retain?
  • Does size matter?
  • Implications for alternatives allocation

The SBAI brings together managers, investors and other industry parties to tackle topical issues through practical case studies and interactive discussions, with the belief that responsible standards of practice strengthen the alternative investment industry for the benefit of both investors and managers.

For more information, please visit the SBAI events page.

2020 Market Preview

2019 was certainly a profitable year for investors as traditional and alternative asset classes delivered positive returns.  As we enter 2020, there are a litany of questions facing global markets ranging from the U.S. election to trade disputes to global monetary policy, all of which will undoubtedly influence investment returns. The following newsletters examine the primary asset classes we cover for our clients, with in-depth analysis of last year’s performance and more importantly, trends, themes, and projections to watch for in 2020.

We hope these materials can assist you and your committees as you plan for the coming year, and please feel free to reach out to any of us should you have further questions about the articles. We have also produced a 2020 Market Preview video if you would like to hear a high-level summary of the market previews. Here’s to another positive year from the markets in 2020!

U.S. Economy: Signs of Slowing?
by Greg Leonberger, FSA, EA, MAAA, Partner, Director of Research

Fixed Income: The New Roaring Twenties — Will It Be Different This Time?
by Ben Mohr, CFA, Director of Fixed Income

U.S. Equities: Climbing the Wall of Worry
by Robert Britenbach, CFA, CIPM Research Analyst, U.S. Equities

Non-U.S. Equities: Big Expectations, Little Wiggle Room
by David Hernandez, CFA, Senior Research Analyst, Non-U.S. Equities
and Nicole Johnson-Barnes, CFA, Research Analyst

Real Estate: What Will Happen Next?
by Jeremy Zirin, CAIA, Senior Research Analyst, Real Assets

Infrastructure: The Energy Revolution Is Driving the Future of Infrastructure
by Jeremy Zirin, CAIA, Senior Research Analyst, Real Assets

Hedge Funds: Rising Geopolitical Risks and a U.S. Election Could Lead to Tempered Expectations
by Joe McGuane, CFA, Senior Research Analyst, Alternatives

Private Equity: As Asset Class Grows, Continues to Deliver for Investors
by Derek Schmidt, CFA, CAIA, Director of Private Equity

Private Credit: An Asset Class Coming Into Its Own
by Brett Graffy, CAIA, Research Analyst

To read the above files in one combined document > 2020 Market Preview

 

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

2020 Market Preview Video

This video coincides with our annual Market Preview newsletters and includes a recap of 2019’s performance and what investors can expect heading into 2020. 2019 was certainly a profitable year for investors as traditional and alternative asset classes delivered positive returns. As we enter 2020, there are a litany of questions facing global markets ranging from the U.S. election to trade disputes to global monetary policy, all of which will undoubtedly influence investment returns.

This video is part of our Market Insights series, a quarterly presentation designed to brief clients on the market as soon as possible after quarterly market data becomes available. Members of our research team discuss the overall U.S. economy, along with fixed income, U.S. and non-U.S. equity, hedge funds, private equity, real estate, and infrastructure.

For more information, questions, or feedback, please send us an email.

Alternatives 101 Video Series

Our Alternatives 101 video series covers each of the major alternatives asset classes, with guidance provided by several of Marquette’s research analysts and directors. In contrast to traditional investments, alternatives investing includes asset classes other than stocks, bonds, and cash (reference our Investing 101 series for more information about traditional investing concepts). This series aims to introduce trustees, staff, and other investors to the key terms and concepts they may encounter when investing in these typically less familiar asset classes.

The series covers:

View each talk in the player below— use the upper-right list icon to access a specific presentation.

For more information, questions, or feedback, please send us an email.

Jeremy Zirin Speaking at 2018 Central States Institutional Forum 3/20

On Tuesday, March 20, Jeremy Zirin, CAIA, will be speaking at the Markets Group 5th Annual Central States Institutional Forum in St. Louis.

Jeremy will join the panel, “Evolving Infrastructure Environment”, and explore how investors are assessing the infrastructure’s longer-term impact on returns and positioning their portfolios to avoid potential risks.

Following the financial crisis, strategies to incorporate infrastructure into the portfolio construction and asset allocation processes continue to evolve as governments seek partnerships and third-party financing to develop energy, water, transportation and social projects critical to economic growth. The panelists will also examine specific strategies investors are using to integrate infrastructure investments into portfolios.

For more information, please visit the Markets Group event page.

Marquette Speaking at PartnerConnect East Event 3/20

On Tuesday, March 20, Marquette will be speaking at the PartnerConnect East 2018 conference in Boston.

As a speaker on Buyouts Magazine’s Panel 5, Derek Schmidt, CFA, CAIA will present on capital call loans, focusing on the pros and cons of this particular portfolio funding strategy.

Hosted in conjunction with PE HUB Network, Buyouts Magazine, and Venture Capital Journal, the flagship conference is designed to connect limited partners, fund managers and service providers to information about critical market issues. For more information, please visit the PartnerConnect East website.

Private Equity Position Paper – 2019 Update

This position paper explores the fundamentals of private equity as an asset class. Particularly, we examine the subcategories of venture capital, growth equity, buyout, direct lending/ mezzanine debt, and distressed, and the investment styles within them; mechanics of investing in private equity including fund structure, commitment period, cash flow, and the J-curve; investor fees and performance; and recent trends. Recommendations and guidance towards the investment manager search process and making an allocation to the asset class are also included.

Download PDF > Private Equity Position Paper

 

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Mike Spychalski Speaking at NIAFPD Annual Conference 1/26

On Friday, January 26, Mike Spychalski, CAIA, will be speaking at the Northern Illinois Alliance of Fire Protection District’s (NIAFPD) 25th Annual Conference in Oak Brook, IL.

Mike will lead a discussion called “Managing Risk & Setting Asset Allocations in Pension Portfolios”. The conversation will focus on challenges associated with managing portfolio risk and returns given current market conditions.

The NIAFPD event is an educational conference designed for trustees, commissioners, chief officers and administrative staff. Attendees will have the opportunity to gather and exchange ideas and information pertaining to fire protection districts.

For more information, please visit the NIAFPD event page.

Marquette Speaking at Diverse and Emerging Manager Forum 1/26

On Friday, January 26, Marquette will be speaking at the Diverse and Emerging Manager Forum and Reception in Houston.

As a panelist at the event hosted by the National Association of Securities Professionals (NASP), Samantha Grant will share perspectives on asset allocation, dispelling the myth of alternatives versus traditional investing and providing insight into potential upcoming business opportunities.

The forum invites investment professionals to hear from plan sponsors, industry practitioners, and policymakers on ways to position their firms to remain competitive as the diverse and emerging manager landscape continues to evolve.

For more information, please visit the NASP forum event page.