Earlier this year, municipal bond investors chasing returns often found themselves over their skis on risk. In our recent call, our fixed income portfolio managers Chris Ryon and Sweta Singh explain their quantitative approach to calculating and managing risk.
Sweta Singh: [If] you cannot measure risk and opportunities, how do you manage them? …[W]e prefer a quantitative approach where we arrive at a top-down picture by building and monitoring a macro-view dashboard. We study various curves, be it Treasuries, agencies, municipals for tax exempt, taxable, corporate. In addition to that, we look at a variety of metrics like roll-down in the curve…core PCE—the Fed's favorite inflation measure—5-year, 5-year break even.
So now, armed with this macro view, we come into the market every day and we look at offerings from our extensive broker dealer network. We also are on a bunch of electronic trading platforms, because frankly, both of us think that they're doing a really good job right now in providing some liquidity in the market. We analyze both opportunities and determine our best ideas by every day being in the market looking at these securities.
Chris Ryon: I view risk management as an essential part of being a portfolio manager. It’s not separate. We have performance attribution tools that identify what the risks are. And that allows us ...to look at the bets we made, how they impacted the portfolio, whether to continue with them, cut them off or add to them, rinse and repeat. That's a continuous cycle.
Listen to the full call to hear our candid takes on risk, valuation, and where to search for opportunities now.
The information and statistics contained in this communication have been obtained from sources we believe to be reliable but cannot be guaranteed. Any projections, market outlooks or forecasts discussed herein are forward-looking statements and are based upon certain assumptions. Other events that were not taken into account may occur and may significantly affect the returns or performance of these investments. Any projections, outlooks or assumptions should not be construed to be indicative of the actual events which will occur. These projections, market outlooks or estimates are subject to change without notice. Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product, or any non-investment related content, made reference to directly or indirectly in this communication will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. No discussion or information contained herein serves as the provision of, or as a substitute for, personalized investment advice. To the extent that a reader has any questions regarding the applicability above to his/her individual situation of any specific issue discussed, he/she is encouraged to consult with the professional advisor of his/her choosing. City Different Investments is neither a law firm nor a certified public accounting firm and no portion of this content should be construed as legal, tax, or accounting advice.
Visitors to the City Different Investments web and social media sites are asked to read these terms.