Roosevelt Investments is now CI Roosevelt Private Wealth

The Sweet Spot

Published on Nov. 13, 2018

The Sweet Spot

In the News:

In an interview in last Friday’s New York Times, Chief Fixed Income strategist at the Schwab Center for Financial Research, Kathy Jones, relayed her concerns that by holding T-Bills or cash equivalents investors may be too defensive. Interestingly she comments on a Morningstar Direct report stating that for the last six months ultrashort-term bond funds have had the highest net inflows among taxable bond funds. Ms. Jones states, “Implicitly, that is trying to time the market…and such behavior can hurt investor returns.” She also mentions her view that the sweet spot for investors is a fixed income portfolio with an average duration from two to five years.

Our Thoughts:

We feel our Current Income Portfolio (CIP) is designed to take advantage of the current environment. As of 9/30/18, more than half of the portfolio had an effective duration of less than 5 years (the weighted average duration on the total portfolio was 4.24 years). CIP may be a suitable solution for those seeking a risk conscious approach to income generation, as the portfolio strays away from high-yield debt and common stocks. Rather, we look to our preferred security sleeve to act as our yield engine. Some of these preferreds are structured as fix-to-floating rate debt instruments, which may benefit investors as rates rise.

As active managers, we seek to provide value by remaining cognizant of current trends, making reasonable and informed expectations of Fed announcements, paying attention to credit spreads and utilizing a mix of fixed rate and fixed-to-float rate securities in preparation of interest rates possibly trending higher.

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