AQR Says Active Bond Fund Returns Juiced by Junk

Researchers at AQR Capital Management say that active bond fund managers are beating benchmarks by “loading up on junk bunds to juice returns.” This according to a recent Bloomberg article. “Since the category is closely linked to equities, that’s stripped away the diversification benefit bond funds normally provide,” the article states. The AQR study, which focused on several different fixed income categories, found that excess returns are highly correlated with junk bond markets. The researchers… Read More

Rotation Out of Bonds Might Be Coming

The probability that funds will flow into equities “at the possible expense of debt” is increasing, despite forecasts to the contrary. This according to Credit Suisse Group AG, reported in a recent Bloomberg article. Robert Griffiths, an equity strategist based in Credit Suisse’s London office, told Bloomberg, “The increase in total returns from stocks, if it continues over the next couple of quarters, raises the prospect of a tipping point in asset allocation in favor… Read More

Bulls and Bears Both Gaining Ground

The continued climb in global stocks this year is being accompanied by rallies in safe-haven assets such as gold and bonds, according to a recent Bloomberg article. “There are plenty of reasons being cautious is paying off,” the article says, such as “politics in Washington is fractured, tension on the Korean peninsula is rising and worries have revived about low U.S. inflation.” But these factors aren’t impeding gains for “equity bulls,” the article says, “who… Read More

Bond Bull Market on Borrowed Time says Miller

The post-election drop in bond prices is pointing toward an end to the decades-old bull market in fixed income, says investor Bill Miller in a recent CNBC article. The founder, chairman and CIO of Baltimore-based LMM says that the money leaving bonds will likely be channeled into the stock market. “The over-investment in bonds is going to switch somewhere,” he says, adding, “I think a large part is going to go to equities like it… Read More