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The Risk of Risk Limits 

Risk Management

In times of heightened volatility, risk limits can protect against equity-market drawdowns. While such measures can dampen portfolio losses, they may also have an impact on long-term returns, particularly in case of a sharp V-shaped market recovery.

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Did Bonds Deliver? Leveraging Fixed Income During the COVID Crisis 

Fixed Income , Risk Management

Investors may employ leverage with lower-risk asset classes such as bonds to seek higher risk and returns. We assessed the effects of leverage on the returns of three hypothetical multi-asset-class portfolios during the COVID-19 crisis.

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Corporate Bonds Through a Factor and ESG Lens 

ESG Research , Factor Indexes , Factor Investing , Factors , Fixed Income , Risk Management

COVID-19 has had a profound impact on how companies manage cash flows and liquidity. Bond investors face the possibility of increased leverage, rating downgrades and defaults. Can factors and ESG metrics shed light on these risks?

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Up in Smoke? Brazil’s Wildfires May Affect Bond Spreads 

ESG Research , Fixed Income , Risk Management

Clearing Brazilian forests to make way for agriculture may spur a backlash to soy and beef producers if purchasers impose deforestation-free rules. What are the potential implications for debt of affected companies and for Brazilian sovereign debt?

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Factors in Focus: How Trendy Is Your Style Factor? 

Factor Investing , Risk Management

As markets rallied worldwide, investors took on high-beta exposure and rotated away from stocks with lower risk. The latest edition of Factors in Focus explores the details.

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Surging Corporate-Bond Supply: Reason to Worry? 

Fixed Income , Risk Management

In the months since the onset of the COVID-19 pandemic, companies issued a large amount of corporate bonds. As a result of this surge, corporate debt has grown substantially — a burden that institutional credit investors may wish to monitor closely.

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COVID-19 and Real Estate: The Devil Is in the Dispersion 

Real Estate Investing , Risk Management

Many real estate markets were showing signs of a slowdown even before COVID-19’s negative impact on property portfolios. Has this correction been similar to previous ones? We looked at dispersion of returns, within and across real estate sectors, for the answer.

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Consumer ABS: Recovering from Coronavirus? 

Risk Management , Fixed Income

After the U.S. COVID-19 lockdown, new monthly remittance reports for asset-backed securities indicated performance deterioration and signaled potential challenges ahead. Meanwhile, in China, ABS showed signs of recovery.

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Can AI Model the Complexities of MBS Prepayment? 

Fixed Income , Risk Management

Machine learning using neural networks has been successfully applied to fields in which extremely complex patterns can prove challenging for other algorithms. Are neural networks suited for modeling prepayment risk in agency mortgage-backed securities?

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Four COVID-19 Scenarios: What Might Happen Next? 

Fixed Income , Risk Management

Our latest COVID-19 stress test looks at four potential financial-market outcomes ranging from a swift V-shaped recovery to a pessimistic L-shaped scenario, in which outbreaks recur and lockdowns return well into 2021.