Credit ratings are one of the important measures for bond investors since these ratings are assessments of the creditworthiness of a borrower, such as a corporation, government, or a specific financial instrument like a bond. These ratings are assigned by privately owned credit rating agencies such as S&P Global, Moody’s, Fitch Ratings, or Scope. They indicate the likelihood that the issuer will meet its debt obligations (interest and principal payments) in full and on time. As a result, credit ratings help investors evaluate default risk, guide interest rates, and influence borrowing costs for bond issuers. More generally speaking, ratings range

Within the current macroeconomic environment where central banks around globe have started to lower interest rates, bond funds and ETFs have become popular investment choices for all kinds of investors. However, their performance is influenced by a variety of risk and return factors that investors need to understand. The first to mention is obviously the interest rate risk. Every investor should bear in mind that bond prices and interest rates move inversely, meaning rising rates can lead to losses, while falling rates increase bond values. A measure to determine the degree of a bond fund’s sensitivity to interest rate changes

Property and real estate investments are in general considered as safe-haven investments because bricks and mortar are real assets which can survive a storm in the equity markets. This claim can be considered as true if an investor invests directly into property. But as fund managers try to optimize the return for their investors, this might not be true for direct property funds and real estate investment trust (REIT) funds investing in commercial properties in the aftermath of the COVID-19 pandemic. Under current economic conditions, the optimization of returns— especially the use of leverage (debt capital)—may cause a problem for

Brent oil has entered into a bear market, as prices have fallen almost $30 a barrel since the beginning of the year. Initial worries over COVID-19 caused the largest weekly decline in Brent oil prices since January 2016, having declined 13.6% during the week of February 28. The sell-off intensified when OPEC+ concluded its meeting on March 6 without a deal to further cut oil production. As a result, Brent oil suffered its largest one-day drop since 1991, declining 24.1% ($10.9/barrel). Oil majors including Exxon, Chevon, BP, ENI, and Total have all seen downgrades to Q1 EPS estimates and are

Fund Market Overall Assets under management in the global collective investment funds market grew US$392.3 billion (+1.0%) for March and stood at US$39.23 trillion at the end of the month. Estimated net inflows accounted for US$126.9 billion, while US$265.4 billion was added because of the positively performing markets. On a year-to-date basis assets increased US$2,049.8 billion (+5.5%). Included in the overall year-to-date asset change figure were US$417.2 billion of estimated net inflows. Compared to a year ago, assets increased a considerable US$3,640.8 billion (+10.2%). Included in the overall one-year asset change figure were US$1,022.0 billion of estimated net inflows. The

As investors have become skittish about the risk/reward tradeoff in high yield funds over the last four weeks, the largest exchange-traded funds (ETFs) in the segment have seen a significant decline in their asset base as net outflows have spiked. The week ended August 6, 2014, saw the second largest net outflows on record for high-yield ETFs as $1.279 billion exited. The largest net outflows for Lipper’s relatively new High Yield ETF segment occurred during the week ended June 5, 2013, at $1.426 billion, when concerns about the Federal Reserve’s plan to wind down its quantitative-easing program were at the

Lipper’s Jake Moeller examines changes to the composition of the IMA Sterling Corporate Bond High Yield sector. April 2014 saw €4.1bn net inflows into bonds funds in Europe as interest in the asset class continues. The highest average debtor quality within the IMA Sterling High Yield sector is to B-rated securities (36%). This is followed by BB-rated securities (33%). Interestingly, these positions have been relatively stable; 12 months ago average exposure to B- and BB-rated securities was 33% and 32%, respectively. This represents only a small average increase to riskier B exposure. Looking at combined C-rated exposure (C+CC+CCC), there has been

Recently, money has poured into mutual funds that invest in bank loans, often low-quality ones. And to a lesser extent, money has also gone into high-yield mutual funds. “It is a very favorable time for bond issuers,” said Martin Fridson, the chief investment officer of Lehmann, Livian, Fridson Advisors and a longtime analyst of the high-yield market. “There is just a lot of money sloshing around out there. There are simply not a lot of alternatives, and money managers are under pressure to put that money to work.”[1] There is a lot for people to consider when investing in low-rated or unrated debt.