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Factors in Focus: Value Springs into Action 

Factor Indexes , Fixed Income , Factor Investing

Value has historically outperformed in economic recoveries. With the reopening of the global economy we examined value’s performance against other factors, and exposures from our adaptive multi-factor model at the end of Q1. 

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Managing the Risks of LIBOR Replacement 

Fixed Income , Risk Management , Global Investing

Investors now have clarity on the process of transitioning away from LIBOR and falling back on replacement benchmark rates. We used stress tests to show that fallback modeling may be necessary to measure and manage the risks of LIBOR instruments.

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How Inflation Could Affect Multi-Asset-Class Portfolios 

Real Estate Investing , Fixed Income , Global Investing , Integrated Risk Management

Market participants are hotly debating whether U.S. monetary and fiscal policy may cause inflation. We consider four scenarios — reflation, disinflation, an overheated economy and stagflation — and their potential impact on multi-asset-class portfolios.

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Climate Transition and Bonds: Risk or Opportunity? 

ESG Research , Fixed Income , Risk Management

The transition to a low-carbon economy could significantly redirect the flow of investments toward greener companies and technologies that limit carbon emissions. We consider the potential risk — and opportunity — for bond investors.

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A New COVID-19 Regime for MBS? 

Fixed Income , Integrated Risk Management

In 2020, the Federal Reserve’s purchases of mortgage-backed securities, low interest rates, mortgage-underwriting policy changes and technology advancements led to a historic refinance frenzy and posed an unprecedented challenge for MBS risk management.

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Cross-Currency Credit Spreads: Mind the Gap 

Fixed Income , Risk Management

An issuer’s credit spread should be consistent when measured in the USD- or EUR-denominated markets, because both are measuring the same credit risk. Yet divergence can occur as a result of liquidity or supply-demand imbalances, such as those in the COVID crisis.

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How Are High-ESG-Rated Bond Portfolios Distinct? 

Fixed Income , Risk Management , ESG Research

ESG investing makes up an increasingly large footprint in equity portfolios, but ESG integration in bond portfolios is still in its early days. We examine the characteristics that make high-ESG-rated corporate-bond portfolios distinct.

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COVID Stimulus Helped Resilience of US ABS 

Risk Management , Fixed Income

Issuance of U.S. asset-backed securities fell by a quarter in 2020 from the previous year, as credit tightened during the COVID-19 crisis. The performance of loans underpinning ABS proved resilient, however, as economic relief helped support consumers.

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What Biden’s Climate Plan Means for US Utilities 

ESG Research

Joe Biden is targeting net-zero carbon emissions in the United States by 2050, but the target date for electricity generation would come 15 years sooner. Are the U.S. utilities sector and investors prepared for net-zero emissions by 2035?

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Carrying on Through a Crisis, with Factors 

Factor Investing , Risk Management , Fixed Income

Factors have long had a place in constructing equity portfolios, but investors increasingly use factors in sovereign and corporate bonds, commodities and currencies. Which non-equity factors have been the best performers coming out of recent crises, and why?