Latest Blog: Stop the Game! - 01/31/2021
Investment Insights are written by Angeles' CIO Michael Rosen
Michael has more than 30 years experience as an institutional portfolio manager, investment strategist, trader and academic.
THE PRESENT IS THE FUTURE (AT LEAST IN BOND LAND)Published: 10-27-2014
In our long-term assumptions, we generally assume that the total return in fixed income is pretty close to its starting yield. That’s because a bond’s total return is a function of two variables: yield and re-investment yield. As yields move up and down, bond prices move inversely, down and up, but the re-investment rate moves positively with yields. In the short-term, changes in prices have a large impact on total return, but given enough time, the re-investment yield (almost) completely offsets the price/yield function.
The table below (courtesy Morgan Stanley), shows the effect of interest rates rising from 3% to 8% at 50 basis points a year over 10 years. The total return over this decade works out mathematically to 3%, (not) coincidentally the starting yield.
There are risks to owning bonds, primarily higher inflation, and to a lesser extent default risk. But the laws of mathematics make us highly confident that the long-term nominal return for bond investors will be right around today’s yield.
PRINT THIS ARTICLE
Stop the Game! 01-31-2021
Jesse Livermore was a legendary stock trader of the early 20th century. Mere rumors of his involvement in a stock could ...READ MORE
Floating Oil 05-24-2016
Oil has had a nice recovery this year (see graph for Brent, YTD), up about 18% to over $48/barrel today. Of course, this ...READ MORE
Feliz Cinco de Mayo! 05-05-2015
There will always be a debate about the relevance of history to current conditions. I am firmly in the pro-history camp, ...READ MORE
We build portfolios of best-in-class investment managers across all asset classes. If you would like to be considered for our portfolios, please contact us using our manager inquiries form.
- MANAGER INQUIRIES
How Can We Help You?Institutional Investors
Fully resourced investment office built to manage sophisticated client investment programsPrivate Wealth
Personalized discretionary portfolio and wealth management services powered by institutional processInvestment Management
Rigorous process and a flexible platform designed to meet client needsArticles & Insights
Latest insights and perspectives from the Angeles teamContact Us
Get in touch