Services Tags: Wealth Advisement

3Q 2019 Market Briefing

Live Webinar – Thursday, October 24, 2019 – 1:00-2:00 PM CT


Please join Marquette’s asset class analysts for a live webinar based on our 3Q 2019 Market Environment. This webinar series is designed to brief clients on the market as soon as possible after quarterly market data becomes available.

The overall U.S. economy will be discussed, along with fixed income, U.S./non-U.S. equity, hedge funds, private equity, real estate and infrastructure.

Featuring:
Greg Leonberger, FSA, EA, MAAA, Partner, Director of Research
Jeffrey Hoffmeyer, CFA, Lead Analyst, Asset Allocation
Ben Mohr, CFA, Director of Fixed Income
Samantha Grant, CFA, CAIA, Senior Research Analyst, U.S. Equities
David Hernandez, CFA, Senior Research Analyst, Non-U.S. Equities
Joe McGuane, CFA, Senior Research Analyst, Alternatives
Jeremy Zirin, CAIA, Senior Research Analyst, Real Assets
Brett Graffy, CAIA, Research Analyst

Who should attend: Institutional investment stewards, private clients, investment managers

Live webinar attendees will be able to submit questions to the presenters and vote in audience polls during the event. Questions will be answered during the final 15 minutes of the webinar, as time allows.

If you are unable to attend the webinar live, you can also view it afterward on demand. Registrants will automatically receive a follow-up email shortly after the end of the webinar to notify them of webinar recording availability

Catastrophe Bonds

Institutional investors are constantly searching for additional asset classes that may help diversify a portfolio and enhance returns. Catastrophe (“cat”) bonds may be such an asset class that could help diversify a portfolio’s interest rate, credit/equity and currency risk by providing non-correlating natural event risk. Cat bonds are typically issued by insurance companies that pool property and casualty policies. They pay coupons to the bondholder using the policy premiums received. When a natural event occurs — such as a hurricane or an earthquake — part of the principal of a cat bond may be used to pay the insurance claims on the pool of policies. In other words, the investor is paid to assume a part of the risk associated with natural events. Historically, cat bonds average 5% to 10% return annually.

This paper discusses the benefits of cat bonds and the mechanics of how they work, along with their market size. The characteristics of cat bonds and the types of cat bond strategies will also be examined. The paper will provide details about cat bonds’ merits and risks to help investors make informed decisions about whether to consider this asset class. It will conclude with a discussion of recent and long-term performance.

Read > Catastrophe Bonds White 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.

 

Investing 101 Video Series

Our Investing 101 video series covers the fundamentals of investing. This series aims to create a knowledge base for trustees, staff, and other investors of the key terms and concepts that they encounter most frequently, with guidance provided by several of Marquette’s research analysts and directors.

The series covers:

Marquette encourages open dialogue with our consultants and research team. For more information, questions, or feedback, please send us an email.

Stoking the Fire: The First Post-Recession Rate Cut

On July 31, 2019, the Federal Reserve cut interest rates for the first time since the 2008 Financial Crisis from a fed funds target rate of 2.25%–2.5% to 2%–2.25%. This well-telegraphed and long-expected 25 basis point cut, roughly 11 years after their last cut in December of 2008, signals a shift in the Fed’s monetary policy towards one of dovish stimulus after a period of hawkishness from 2015 to 2018 that saw the Fed raise the fed funds target rate nine times from 0–0.25% to 2.25%–2.5%.

This newsletter examines the reasons behind and the initial and potential reactions to the latest interest rate cut, including a look at unemployment, inflation, and the yield curve.

Read > Stoking the Fire: The First Post-Recession Rate Cut

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.

Second Quarter Review of Asset Allocation: Risks and Opportunities

Overall, the second quarter was positive for financial markets, thanks to strong economic fundamentals and expected Fed stimulus. Unemployment remains low at 3.7% and inflation (1.8% year over year) is near the Fed’s long-term target of 2%. However, there are increasing concerns about a global economic slowdown and early forecasts for 2Q GDP growth are around 1.5%, far lower than what we’ve seen in recent quarters. Globally, the most important trends we see are the following:

  • The U.S.-China trade conflict remains ongoing as talks between the two countries resumed, but little progress has been made;
  • The Federal Reserve is expected to cut rates in July and markets are forecasting another one to two cuts by the end of the year;
  • Business sentiment is declining ­— most notably in the PMI manufacturing index, which is now dangerously close to falling below its growth threshold;
  • Britain continues to struggle with its Brexit and elected a new PM (Boris Johnson) on July 23rd;
  • China and Europe are expected in increase their stimulus measures to combat slow growth and overall global uncertainty;
  • Late-cycle dynamics in credit and equity markets.

The impact of these trends is explored further in this newsletter as we review second-quarter performance and expectations going forward for each of the major asset classes.

Read > Second Quarter Review of Asset Allocation: Risks and Opportunities

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.

Real Estate: Where Do We Go From Here?

Over the last ten years, core real estate as measured by the NFI-ODCE has delivered an annualized return of almost 9% and has helped boost institutional portfolio returns. However, given the consensus view that we are in the late stage of the economic cycle, coupled with overall global uncertainty and moderating returns in the asset class, investors are wondering if it is time to reduce their allocation to real estate, and if so, where they should allocate these funds.

The following article strives to answer these questions by analyzing the current landscape for real estate investments, including opportunities outside of the traditional “core” strategies that have historically constituted the majority of real estate investments for our clients. Furthermore, we offer guidance on where to allocate assets outside of the real estate asset class if investors have built up overweights to the asset class over the last decade of outperformance.

Read > Real Estate: Where Do We Go From Here?

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.

When Will the SOFRing End?

Global authorities such as the SEC, Federal Reserve, European Commission and European Central Bank are currently transitioning the market’s use of LIBOR as a base rate for floating-rate securities such as bank loans, CLOs and private credit towards the use of the current front runner as a replacement: SOFR, which stands for the Secured Overnight Financing Rate.

This newsletter explains what a base rate is and how it is used in investing, why LIBOR is being transitioned to SOFR and the key differences between the two, and when the change is expected to take effect.

Read > When Will the SOFRing End?

For more coverage on LIBOR, please see our Bank Loans Position Paper and recent Chart of the Week, The Sixth Fed Hike and Rising LIBOR.

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.

Bank Loans Position Paper

Bank loans represent a key strategic asset class for most institutional investors’ fixed income portfolios. Some of the critical benefits of bank loans include yield that is typically greater than that of core bonds, a floating rate and therefore very little interest rate risk, and a senior secured level in the debt capital structure of issuers such that default risk is minimized and recovery rates are maximized. This position paper covers the history of the asset class as well as some unique characteristics that make it a vital part of many institutional investors’ portfolios. We will also examine its historical returns and correlations with other asset classes, as well as its risks ranging from credit to liquidity risk and interest risk to reinvestment risk. We will conclude with an assessment of its recent valuations as well as how to access this asset class.

Download PDF >

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.

 

Sell in May and Go Away?

Global equity markets declined in May on a flurry of geopolitical news. As tensions persist, stocks are grasping to sustain their former rocket-like pace.

This newsletter details the recent trade and tariff announcements, their impact on the markets, and a look at what to expect in the remaining months of 2019.

Read > Sell in May and Go Away?

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.

Municipal or Taxable Bonds for High Net Worth Investors?

Municipal bonds remain attractive and still make sense for high net worth investors on a go-forward basis even in the wake of the Tax Cuts and Jobs Act that went into effect in 2018 and the spread-widening that we experienced in the credit markets during the fourth quarter of 2018. This research brief compares the current state of municipal bonds versus taxable bonds, including:

  • The Municipal/Treasury Ratio
  • A Comparison of Long-Term Historical Returns
  • Tax-Equivalent Yields

Read > Municipal or Taxable Bonds for High Net Worth Investors?

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.