| Bonds Online |
 |
|
| 5/10/2013Market Performance |
| Municipal Bonds |
|---|
|
S&P National Bond Index
|
3.00% |
|
|
S&P California Bond Index
|
2.96% |
|
|
S&P New York Bond Index
|
3.13% |
|
|
S&P National 0-5 Year Municipal Bond Index
|
0.70% |
|
|
| S&P/BGCantor US Treasury Bond |
400.09 |
|
| More |
|
| Income Equities: |
|---|
| Preferred Stocks |
|---|
|
S&P U.S. Preferred Stock Index
|
848.03 |
|
|
S&P U.S. Preferred Stock Index (CAD)
|
636.26 |
|
|
S&P U.S. Preferred Stock Index (TR)
|
1,701.05 |
|
|
S&P U.S. Preferred Stock Index (TR) (CAD)
|
1,276.26 |
|
|
| REITs |
|---|
|
S&P REIT Index
|
174.07 |
|
|
S&P REIT Index (TR)
|
425.30 |
|
|
| MLPs |
|---|
|
S&P MLP Index
|
2,469.58 |
|
|
S&P MLP Index (TR)
|
5,428.50 |
|
|
See Data
|
|
|
|
 |
|
|
|
|
|
|
Are We Near a Cyclical Inflection Point? |
MORNINGSTAR - July 27, 2011 - By Liana Madura
Downside pressures with equities could be on the horizon, but investing in low-duration bonds can help minimize this risk, says Sierra's Frank A. Barbera Jr.
Frank A. Barbera Jr. is an executive vice president at Sierra Investment Management and also co-portfolio manager at Sierra Core Retirement (SIRAX), a low-volatility, highly diversified mutual fund designed for retirees and other conservative investors. A strategist employing both technical and fundamental analysis, Mr. Barbera has spent years studying global macroeconomics. During the course of his career, he has created a wide range of technical market indicators and developed trend-following techniques.
He recently answered our questions on the asset-allocation techniques that retirees should employ to enjoy a satisfying return with a limited downside risk as well as the opportunities of investing in high-yield bonds. He also commented on his outlook for the municipal bond market and the counter-productivity of a potential third round of quantitative easing.
1. Many retirees were hit hard during the last financial crisis. What strategy did you employ to limit volatility and minimize downside risk for the investor? Looking forward, are you planning on altering this strategy for future protection?
Well, at the heart of our process, Sierra Core always starts with a very widely diversified allocation. By employing widespread diversification, the Core fund is able to find assets that are largely noncorrelated.
So, the first point to understand is that our asset-allocation approach is adaptive and adjusts to different phases of the cycle. For many years, we've studied each different asset class that we invest in, with particular attention to the varying levels of historical volatility that are innate to each asset class.
Along those lines, our quantitative approach establishes a trailing-stop loss that is unique for each asset class, and in both the 2000-03 bear market, along with the 2007-08 bear market, it was the trailing-stop component which, early on, moved our client money out of harm's way and into the safety of cash.
This risk-control discipline helped us protect our investors from the kind of heart-stopping percentage losses that a straight buy-and-hold approach would have inflicted upon investors. It is a central belief that we hold that investors of a certain age need to be far more risk-adverse, especially toward volatile markets such as equities, and prioritize among their goals the protection of valuable capital.
At Sierra Core Retirement, we manage our portfolio by focusing on two overriding goals. First, we seek to deliver a satisfying return, averaging 8%-10% after all fees, and second, we seek to limit downside risk of the overall portfolio to no more than 4%-5% in a volatile quarter or volatile year.
This goal of limiting downside risk to 4%-5% for the overall portfolio ensures that our investors will be protected even in the worst of market circumstances. By protecting capital in treacherous market episodes, our investors' capital will be available to redeploy when market trends eventually improve.
2. You have long-held high-yield bonds and a basket of commodities within the portfolio. What's your thinking behind these moves?
Quite simply, high-yield bonds are among our favorite assets to invest in during the risk-taking part of the investment cycle. It's actually funny, but when markets are doing well, and these bonds are in steady uptrends, people call them "high yield." Then, when risk assets stumble and these bonds begin to fall, the terminology suddenly switches over and people call them "junk bonds."
In fact, I can go a step further and tell you that during the course of a typical stock market cycle, high-yield bonds tend to correlate on the order of 70%-75% with the U.S. stock market but with only about 25% of the stock market's volatility. For the Sierra Core fund, that means we have the opportunity to capture very handsome returns in a positive market climate, and then sidestep the bulk of the downside movement when the cycle turns negative. By approaching high-yield bonds in this manner, we can generate double-digit returns in this asset class, which we have done for years.
For the complete article.
|
|
|
|
|
|
| Partner Market Place |
|
|
|
| Stuff to look at |
Yield and Income Newsletter: A must have for income investors. subscribe NOW
S&P Commentary and Newsletters: S&P
|
|
| BondsOnline Advisor |
Income Security Recommendation January 2013 Issue.
Keep up with monthly, in-depth coverage of fixed income market strategies, commentary, and insights as seen by our sources. Sign up for the free BondsOnline Advisor now!
Unsubscribe here [+] |
|
|
|
|
