Latest Blog: Mismatch - 03/20/2023
-
-
CIO INSIGHTS
-
CIO INSIGHTS
-
BACK TO CIO INSIGHTS
BACK TO ARTICLES & INSIGHTS HOME
-
-
-
-
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: 10-27-2014In 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 ARTICLERELATED ARTICLES
-
Money Matters 11-17-2014
When the Fed embarked on Quantitative Easing (QE), many prominent economists warned this would lead to hyperinflation ...
READ MORE -
Après moi le déluge 01-05-2016
In more ways than one.We greeted the new year with an actual deluge, at least here in California, as the long-promised ...
READ MORE -
Non-Zero Sum 02-17-2017
There are prominent voices (and tweets) urging us to pull back, dig in, and lock the gate. This rising chorus of ...
READ MORE
-
-
We strive 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
-
SUBSCRIBE TO ANGELES' INSIGHTS
Get the latest investment information and stay on top of market trends.
-
CONTACT US
SANTA MONICA
429 SANTA MONICA BLVD,
SUITE 650
SANTA MONICA, CA 90401
310.393.6300
GET DIRECTIONS -
NEW YORK
375 PARK AVENUE,
SUITE 2209
NEW YORK, NY 10152
212.451.9240
GET DIRECTIONS -
CHICAGO
400 N. MICHIGAN AVE,
SUITE S1700
CHICAGO, IL 60611
312.212.6843
GET DIRECTIONS -
HOUSTON
5151 SAN FELIPE ST,
SUITE 1480
HOUSTON, TX 77056
713.832.3670
GET DIRECTIONS
How Can We Help You?
Institutional InvestorsFully resourced investment office built to manage sophisticated client investment programs
Private WealthPersonalized discretionary portfolio and wealth management services powered by institutional process
Investment ManagementRigorous process and a flexible platform designed to meet client needs
Articles & InsightsLatest insights and perspectives from the Angeles team
Contact UsGet in touch